Wrap Text
Profit and dividend announcement for the reporting period ended 31 December 2017
Barclays Africa Group Limited
Registration number: 1986/003934/06
Incorporated in the Republic of South Africa
JSE share code: BGA
ISIN: ZAE000174124
Profit and dividend announcement
for the reporting period ended 31 December
Salient features
* Barclays Africa Group Limited (BAGL) disclosed International Financial Reporting
Standards (IFRS) financial results and a normalised view, which
adjusts for the financial consequences of separating from Barclays PLC.
* Normalised diluted Headline earnings per share (HEPS) grew 4% to 1 837.7 cents, while
diluted IFRS HEPS including R1,9bn of separation costs decreased 4% to 1 716.5 cents.
* Declared a 4% higher full year dividend per share (DPS) of 1070 cents.
* South Africa Banking headline earnings grew 4% to R12,2bn, Rest of Africa Banking rose 7%
to R3,0bn and Wealth,
Investment Management and Insurance (WIMI) decreased 8% to R1,2bn.
* Normalised return on equity (RoE) declined slightly to 16,4% and return on assets (RoA)
improved to 1,38%.
* Normalised revenue grew 1% to R72,9bn and operating expenses rose 4% to R41,4bn.
* On a constant currency basis normalised revenue grew 3% and diluted HEPS increased 7%.
* Normalised pre-provision profit declined 3% to R31,5bn.
* Credit impairments fell 20% to R7,0bn, resulting in a 0,87% credit loss ratio from 1,08%.
* Barclays Africa Group Limited’s normalised Common Equity Tier 1 (CET1) ratio of 12,1%
remains above regulatory requirements and our board target range.
* Normalised net asset value (NAV) per share rose 5% to 11 550 cents.
Normalised reporting
With the process of separating from Barclays PLC well under way, including receipt of the R12,1bn
settlement contribution in June 2017, Barclays Africa Group Limited (BAGL) has reported both IFRS
compliant financial results and a normalised view. The latter adjusts for the consequences of the
separation and better reflects the Group’s underlying performance. The Group will present normalised
results for future periods where the financial impact of separation is considered material. Normalisation
will adjust for the following items: endowment income on Barclays PLC’s R12,1bn separation contribution
(2017: R325m); hedging revenue linked to separation activities (2017: R80m); operating expenses
(2017: R1 901m) and other expenses (2017: R394m), plus the tax impact of the aforementioned (2017: R408m).
In total, these adjustments added R1 245m to normalised group headline earnings during the period.
Since normalisation occurs at a group level, it does not affect divisional disclosures.
Overview of results
On a normalised basis, BAGL’s headline earnings grew 4% to R15 558m from R14 980m and diluted HEPS
rose 4% to 1 837.7 cents from 1 769.4 cents. The Group’s normalised RoE was 16,4% from 16,6% and its
return on assets increased to 1,38% from 1,34%. Revenue grew 1% to R72,9bn, with net interest income and
non-interest income rising 1%. Revenue growth improved to 3% in the second half. The Group’s net interest
margin (on average interest-bearing assets) was flat at 4,95%. Loans and advances to customers grew 4% to
R750bn, while deposits due to customers rose 2% to R690bn. With operating expenses growing 4%, the
normalised cost-to-income ratio increased to 56,8% from 55,2%, and pre-provision profit decreased 3%
to R31,5bn. The stronger rand reduced Group revenue by 2% and headline earnings by 3%. In constant
currency, pre-provision profit declined 1%, and grew 2% in the second half. Credit impairments fell
20% to R7,0bn, resulting in a 0,87% credit loss ratio from 1,08%. The ratio of Non-performing loans (NPLs)
to gross loans and advances improved to 3,7% from 3,9%, and portfolio provisions decreased to 70 basis
points (bps) of performing loans from 79 bps, although macroeconomic overlays increased 2% to R1,4bn.
The Group’s NAV per share increased 5% to 11 550 cents on a normalised basis and it declared a 4% higher
full year dividends per share (DPS) of 1 070 cents.
Excluding normalisation, BAGL’s IFRS headline earnings declined 4% to R14 313m from R14 980m and
diluted HEPS decreased 4% to 1 716.5 cents. The Group’s RoE fell to 14.2%, largely due to the additional
capital, and its return on assets declined to 1,27% from 1,34%. Net interest income increased 2% and
non-interest income increased by 1% , resulting in 1% higher total revenue. Operating expenses grew 8%,
increasing the cost to income ratio to 59,1% from 55,2% and pre-provision profit decreased 8% to R30,0bn.
The Group’s NAV per share rose 19% to 13 018 cents, given Barclays PLC’s separation contribution in
equity.
South Africa Banking headline earnings grew 4% to R12 200m. Within this, Retail and Business Banking
(RBB) SA headline earnings rose 1% to R8 874m due to 16% lower credit impairments and improved second
half revenue growth. Retail Banking headline earnings were flat at R6 546m, while Business Banking grew
1% to R2 328m. Corporate and Investment Banking (CIB) rose 16%, given 5% higher pre-provision profits
and 44% lower credit impairments. Corporate rose 8% to R1 143m and Investment Banking increased 22% to
R2 183m. Rest of Africa Banking headline earnings grew 7% to R2 954m, or 24% in constant currency. RBB
Rest of Africa declined 6%, despite rising 19% in constant currency, while CIB Rest of Africa grew 8%
and 21% in constant currency. WIMI’s headline earnings decreased 8% to R1 156m, reflecting higher
catastrophe event claims, unwinding of a Life deferred tax asset raised in 2016 and a single client
credit impairment in Wealth.
Operating environment
The global expansion has been broad-based across economies and sectors. US growth was the positive
surprise in the second half, but the Euro area, Japan and China all grew at or above consensus. Global
inflation remained muted, allowing for gradual normalisation of monetary policy in advanced economies.
South Africa’s economic growth remained low for a fifth consecutive year, with real GDP rising 0.9%
after recovering from recession in early 2017. The rebound in agriculture contributed to the improvement
following two years of drought. However, household and business confidence remained weak due to economic
and political uncertainty. The Reserve Bank reduced interest rates 25 bps in July, South Africa’s first
rate cut in five years.
Economic growth improved somewhat in a number of our key rest of Africa countries, supported by
commodity price recovery and ongoing infrastructure investment. We expect real GDP to have grown 5.4%
across our markets in 2017, although it varied across our portfolio. Fiscal challenges remain a key
constraint in several markets, more notably Ghana, Mozambique and Zambia. Rates were reduced in all
our countries besides Kenya, with sizeable cuts in Ghana, Zambia and Tanzania.
Group performance
Statement of financial position
Total assets increased 6% to R1 165bn at 31 December 2017 on a normalised basis, due to 37% higher
trading portfolio assets and 11% growth in loans and advances to banks.
Loans and advances to customers
Net loans and advances to customers increased 4% to R750bn, or 5% on a constant currency basis. South
Africa Banking loans rose 5% to R666bn. Retail Banking South Africa’s loans grew 2% to R383bn, reflecting
8% growth in Vehicle and Asset Finance (VAF) and 6% higher Personal Loans, while Card and Payments declined
1% and Home Loans remained flat. Business Banking South Africa’s loans rose 7% to R63bn. CIB South Africa’s
loans grew 8% to R219bn, including 16% growth in Corporate and 4% in the Investment Bank. Rest of Africa
Banking loans were flat at R78bn, despite increasing 9% in constant currency.
Funding
The Group’s liquidity position remains strong, with liquid assets and other sources of liquidity growing
11% to R213bn, which equates to 31% of customer deposits. The Group’s three-month average liquidity coverage
ratio for the fourth quarter of 2017 was 107,5%, comfortably above the minimum hurdle of 80% during 2017.
The Group’s deposits due to customers grew 2% to R690bn or 4% in constant currency. Loans to deposit and debt
securities ratio increased to 90,6%. Deposits due to customers constituted 77% of total funding. Retail Banking
South Africa increased deposits 6% to R187bn and Business Banking rose 4% to R114bn, while CIB’s grew 2% to
R177bn. Rest of Africa Banking deposits decreased 3% to R109bn, despite growing 6% in constant currency.
Net asset value
The Group’s normalised NAV rose 5% to R98bn and its NAV per share grew 5% to 11 550 cents. During the
year it generated retained earnings of R15,1bn, from which it paid R8,8bn in ordinary dividends. Its
foreign currency translation reserve reduced to R0.4bn from R2.4bn.
Capital to risk-weighted assets
Group risk-weighted assets (RWAs) increased 5% to R737bn at 31 December 2017, due to increased credit risk
RWAs. The Group remains well capitalised, comfortably above minimum regulatory requirements. The Group’s
normalised CET1 and Tier 1 capital adequacy ratios were 12,1% and 14,9% respectively (from 12,1% and 14,8%).
The Group generated 2,2% of CET1 capital internally during the period. The day 1 impact from implementing
IFRS 9 accounting is expected to reduce the Group’s CET1 ratio by no more than 35 bps, which will be phased
in over three years. Declaring a 4% higher full year DPS of 1 070 cents on a dividend cover of 1,7 times
took into account the difficult and volatile macroeconomy, the Group’s strong capital position, internal
capital generation, strategy and growth plans.
Statement of comprehensive income
The commentary below relates to normalized results
Net interest income
Net interest income increased 1% to R42 319m from R42 003m, while average interest-bearing assets grew 1%.
The Group’s net interest margin (to average interest-bearing assets) was unchanged at 4,95%. Net interest
income grew 3% on a constant currency basis.
Loan pricing reduced the Group’s margin by 2 bps, primarily due to the impact of lower National Credit Act
(NCA) caps on unsecured retail portfolios in South Africa. Loan composition reduced the margin by 3 bps, given
a higher proportion of CIB loans. The Group’s deposit margin increased 1basis point, largely due to improved
pricing and mix in Corporate. The structural hedge released R258m to the income statement, in line with its 2016
contribution. Despite July’s interest rate cut in South Africa, the capital and deposit endowment benefit increased
3 bps, as these balances grew faster than interest bearing assets. Rest of Africa reduced the Group margin by
2 bps, mainly reflecting regulatory caps in Kenya and its lower weighting in the overall composition due to the
stronger Rand.
South Africa Banking’s net interest margin narrowed to 3,37% from 3,47% and Rest of Africa Banking’s decreased
to 7,18% from 7,25%.
Non-interest income
Non-interest income grew 1% to R30 581m from R30 391m to account for 42% of total revenue. On a constant
currency basis, the growth was 2%.
Net fee and commission income grew 5% to R21 711m, which represented 71% of total non-interest income.
Electronic banking fees and commissions increased 3% to R5 185m and cheque accounts fees rose 14% to R4 943m.
Credit card fees and commissions increased 1% to R2 624m and savings accounts decreased 10% to R2 062m. Card
merchant income grew 8% to R1 890m. Investment, markets execution and investment banking fees increased 42%
to R568m.
Net trading excluding hedge accounting declined 11% to R4 855m, reflecting lower South Africa trading revenue
and the impact of the strong Rand.
Within other operating income, there was a non-headline foreign currency translation reserve gain of
R320m in the first half of 2016, which did not recur. South Africa Banking’s non-interest income grew 4% to
R21 366m, 70% of the Group total. Retail Banking South Africa increased 6% to R13 519m, as Transactional and
Deposits grew 7% and Card and Payments 3%, including 11% growth in acquiring volumes. Business Banking’s
non-interest income increased 4% to R3 663m, with 9% higher growth excluding equities. CIB South Africa
declined 1% to R4 184m, with Corporate up 10% and the Investment Bank down 6% due to lower Markets revenue.
Rest of Africa Banking’s non-interest income declined 7% to R4 853m due entirely to the strong Rand,
as constant currency growth was 3%. CIB Rest of Africa declined 6% to R2 297m, but increased 5% in constant
currency. RBB Rest of Africa fell 8% to R2 550m, which was 1% higher in constant currency.
WIMI’s non-interest revenue grew 6% to R5 128m, reflecting 6% higher Life Insurance net premium
income and policyholder and reserving adjustments recognised in 2016 which did not recur.
Impairment losses on loans and advances
Credit impairments decreased 20% to R7 022m from R8 751m, which improved the Group’s credit loss ratio
to 0,87% from 1,08% of gross customer and bank loans and advances. Credit impairments included collection
costs of R289m.
Group NPLs decreased 1% to R30 891m, or 3.75% of gross loans and advances from 3.94%. Total NPL
coverage declined to 43,1% from 44,2%. Total balance sheet provisions decreased 4% to R18 874m partially
reflecting the write-off of an exposure in CIB South Africa during 2016. Portfolio provisions declined 7%
to R5 560m, constituting 0,70% of total performing loans from 0,79%, largely due to lower model driven
impairments. Macroeconomic overlays grew 2% to R1,4bn.
South Africa Banking credit impairments decreased 20% to R5 605m, resulting in a 0,80% credit loss
ratio from 1,03%. Retail Banking credit impairments declined 12% to R4 764m, reducing its credit loss
ratio to 1.20% from 1.39%, due to the improved quality of new loans, better collection strategies and
reduced store card sales. Home Loans’ charge fell 25% to R689m, a 0,30% credit loss ratio from 0,40%.
Vehicle and Asset Finance’s credit impairments declined 19% to R847m, improving its credit loss ratio
to 0.87% from 1.14%. Card credit impairments decreased 18% to R1 924m, resulting in a 4,53% credit
loss ratio from 5,41%. Personal Loans’ charge rose 12% to R1 112m, reflecting stricter write off
criteria, which increased Its credit loss ratio to 6,09% from 5,68%.
Business Banking South Africa credit impairments fell 53% to R274m, reflecting lower early arrears
and improved collections. Its credit loss ratio decreased to 0,43% from 0,98%.
CIB South Africa credit impairments decreased 44% to R567m from R1 020m, due to a large single name
exposure in 2016. Its credit loss ratio normalised to 0,24% from a high base of 0,44%.
Rest of Africa Banking credit impairments fell 26%, or 18% in constant currency, to R1 289m from
R1 732m. Its credit loss ratio improved to 1,34% from 1,62%. RBB Rest of Africa’s charge fell 30%, or
23% in constant currency, to R950m reflecting increased focus on collections. CIB Rest of Africa’s credit
impairments decreased 11%, or 3% in constant currency, due to both an adjustment to emergence periods and
some specific exposures in the base.
Operating expenses
Group operating expenses grew 4% to R41 403m from R39 956m, resulting in a 56,8% cost-to-income ratio
from 55.2%. In constant currency operating expenses increased 6%.
Staff costs grew 5% and accounted for 56% of total expenses. Salaries rose 5% or 7% in constant currency,
while total incentives grew 4%. Headcount increased 1%, largely due to technology hires in South Africa,
while rest of Africa declined 4%.
Non-staff costs grew 2%. Professional fees fell 2% to R1 699m, while telephone and postage declined
7% and printing and stationery decreased 9%. Operating leases on properties decreased 4% to R1 606m and
property costs rose 1% to R1 731m. Marketing costs grew 8% to R1 709m, reflecting retail product campaigns
and the Shared Growth initiative. Total IT-related spend grew 8% to R7 362m and constituted 18% of Group
expenses. Amortisation of intangible assets rose 1% to R650m, while cash transportation increased 13% to
R1 089m. The 19% growth in depreciation reflects investment in technology and optimisation of the corporate
property portfolio and branch network.
South Africa Banking costs grew 6% to R30 102m. RBB South Africa increased 7%, reflecting continued
investment in frontline staff, marketing campaigns and retail product launches, plus digital and channels.
CIB South Africa expenses grew 2%, reflecting efficiency initiatives.
Rest of Africa Banking expenses decreased 2% due to the strong Rand. Its costs increased 7% in constant
currency, with CIB growing 12% and RBB rising 5%. Operating expenses increased in the second half, given
incremental IT costs after Barclays PLC’s sell down. Excluding these, costs were contained at below
inflation, allowing Rest of Africa Banking to maintain a stable cost-to-income ratio of 57,6%.
WIMI’s costs grew 3% to R3 631m, with continuing line costs increasing 4%.
Other expenses decreased 12% to R1 876m, reflecting 53% lower ‘other impairments’ to R322m and 9% higher
indirect taxation of R1 554m.
Taxation
The Group’s taxation expense increased 7% to R6 265m, slightly above the 5% growth in pre-tax profit,
resulting in a 27,5% effective tax rate from 26,9%. The increase largely reflects 56% growth in non-tax
deductible expenses.
Segment performance
The segmental disclosure has changed to reflect the Group’s leadership structure and the way in which
businesses are run along geographic rather than divisional lines.
South Africa Banking
Headline earnings grew 4% to R12 200m, due to 20% lower credit impairments, as pre-provision profits
declined 2% to R23 243m. Revenue grew 2% to R53 345m, with non-interest income increasing 4%. Costs grew
6% to R30 102m, resulting in a 56,4% cost to income ratio from 54,4%. Its credit loss ratio fell to 0,80%
from 1,03%, as all three divisions improved. South Africa Banking generated a return on regulatory capital
(RoRC) of 20,8% and constituted 75% of total normalised headline earnings excluding the Group centre.
RBB South Africa
Headline earnings increased marginally to R8 874m, largely due to 16% lower credit impairments. Non-interest
income grew 5%, while net interest income was flat due to margin compression. Operating expenses rose 7%,
reflecting continued investment in systems and frontline staff. RBB South Africa accounted for 54% of normalised
headline earnings excluding the Group centre and generated a 23.5% RoRC.
Retail Banking South Africa
Headline earnings were flat at R6 546m, as pre-provision profits declined 3%, which was offset by 12%
lower credit impairments. However, headline earnings grew 12% in the second half, as new loan production
and revenue improved. Although Transactional and Deposits’ non-interest income grew 7%, higher credit
impairments and 9% cost growth resulted in earnings falling 8% to R2 470m. Home Loans’ earnings rose 5% to
R1 715m, reflecting cost containment, strong non-interest income growth and 25% lower credit impairments. Card
and Payments earnings grew 3% to R1 601m, largely due to lower credit impairments and growth in acquiring revenue.
Vehicle and Asset Finance earnings grew 20% to R963m, on 19% lower credit impairments and solid non-interest
income and loan growth. Lower costs drove the 3% rise in Personal Loans earnings to R436m. Retail Banking South
Africa accounted for 40% of normalised headline earnings excluding the Group centre and generated a 23,1% RoRC.
Business Banking South Africa
Headline earnings increased 1% to R2 328m, as credit impairments dropped 53%. Revenue growth improved in
the second half, but pre-provision profits declined as costs grew 11% given continued investment in frontline
staff and systems. Non-interest income rose 9% excluding equities. Business Banking South Africa generated 14%
of overall normalised headline earnings excluding the Group centre and produced a 27,7% RoRC.
CIB South Africa
Headline earnings increased 16% to R3 326m, largely due to a 44% reduction in credit impairments off a
high base. Pre-provision profits grew 5% as 3% revenue growth exceeded 2% higher costs. Corporate earnings
grew 8% to R1 143m as 9% revenue growth produced 15% higher pre-provision profits. Investment Bank earnings
increased 22% to R2 183m, largely due to 60% lower credit impairments and reduced costs. CIB South Africa
contributed 20% of total normalised headline earnings excluding the Group centre and generated a 15.9% RoRC.
Rest of Africa Banking
Headline earnings grew 7%, or 24% in constant currency, to R2 954m, due to positive constant currency
operating Jaws and 26% lower credit impairments. Pre-provision profits increased 9% in constant currency.
Revenue fell 3% to R15 617m, masking 8% growth in constant currency. While costs fell 2% to R9 000m, it rose 7%
in constant currency, resulting in a 57,6% cost-to-income ratio. Credit impairments fell 26% to R1 289m, resulting
in a 1,34% credit loss ratio from 1,62%. Rest of Africa Banking accounted for 18% of total normalised headline
earnings excluding the Group centre and generated a 16,6% RoE.
RBB Rest of Africa
Headline earnings fell 6% to R670m, despite increasing 19% in constant currency. Constant currency revenue
growth of 2% reflected margin compression from regulatory changes in Kenya. Costs grew 5% in constant currency,
resulting in a 72,4% cost-to-income ratio. Credit impairments decreased 23% in constant currency, improving its
credit loss ratio to 2,22% from 2,92%. RBB Rest of Africa contributed 4% of total normalised headline earnings
excluding the Group centre.
CIB Rest of Africa
Headline earnings grew 8% to R2 348m, or 21% in constant currency. Revenue increased 7% to exceed 3%
higher costs. These grew 18% and 12% in constant currency respectively to produce a 36.5% cost-to income-ratio.
Pre-provision profits increased 9%. Credit impairments fell 3% in constant currency. Corporate earnings grew 18% or
32% in constant currency to R1.7bn. Rand strength reduced Investment Bank’s earnings, which declined 10% to R0,7bn,
despite rising 2% in constant currency. CIB Rest of Africa contributed 14% of total normalised headline earnings
excluding the Group centre.
Wealth, Investment Management and Insurance
Headline earnings decreased 8% to R1 156m. South African earnings decreased 17% to R1 137m and Rest of Africa
returned to profitability, with earnings of R19m. Gross operating income grew 2% to R6 171m and costs rose 3% to
R3 279m. Life insurance earnings fell 9% due to the unwinding of a deferred tax asset raised in the prior year.
Embedded value of new business increased 10% from growth in risk policies written. Despite strong 16% growth in
assets under management to R335bn, the Investment cluster earnings were impacted by margin compression resulting
in 2% growth in earnings. WIMI earnings declined to a R49m loss due to credit impairments on a single client.
Short-term insurance earnings grew 2%, despite experiencing significantly higher catastrophe event claims. Excluding
these events, its underwriting margin in South Africa improved to 8.7%. WIMI’s RoE was 20,1% and it generated 7% of
total earnings excluding the Group centre.
Prospects
In South Africa we expect a modest improvement in real GDP growth to 1.4% in 2018, with upside potential
from fixed investment, a rebound in confidence and strong global growth, although fiscal consolidation remains
a concern and there is downside risk for credit ratings. We believe the South African Reserve Bank will keep
interest rates on hold for some time.
Our latest forecast indicates slightly better GDP growth of 5.8% in our markets in the rest of Africa,
with further monetary policy easing in a number of countries. At current exchange rates the rand could weigh
on our rest of Africa reported growth again in 2018.
Given these assumptions, and excluding major political, macroeconomic or regulatory developments, we expect our
loan and deposit growth to improve in 2018. We again see stronger loan growth from the rest of Africa in constant
currency and CIB than Retail South Africa. Our net interest margin is likely to decline slightly this year, due
to rate cuts in the rest of Africa, regulatory costs and mix effects. Costs will remain well controlled and our
operating Jaws should improve from last year’s. While IFRS 9 could increase volatility, we expect a stable
credit loss ratio. Our CET1 ratio is likely to remain above Board targets, which will allow us to maintain our
current dividend cover. Lastly, our normalised RoE should improve slightly in 2018.
Normalised financial results as a consequence of Barclays PLC separation On 1 March 2016, Barclays PLC announced
its intention to sell down its 62,3% interest in the Group. A comprehensive separation programme was initiated
by Barclays PLC and the Group to determine possible interactions between the companies to ensure that the Group
can operate as an independent and sustainable group without the involvement of Barclays PLC.
Barclays PLC currently holds 14.9% in the Group.
As part of its divestment Barclays PLC contributed £765m to the Group, primarily in recognition of the investments
required for the Group to separate from Barclays PLC. Investments will be made primarily in rebranding, technology
and separation-related projects and it is expected that it will neutralise the capital and cash flow impact of
separation investments on the Group over time. The separation process will have an impact on the Group’s financial
results for the next few years, most notably by increasing the capital base in the near-term and generating
endowment revenue thereon, with increased costs over time as the separation investments are concluded.
International Financial Reporting Standards (IFRS) require that the Barclays PLC contribution be recognised
directly in equity, while the subsequent investment expenditure (including the depreciation or amortisation of
capitalised assets), will be recognised in profit or loss. The aforementioned will result in a disconnect between
underlying business performance and the IFRS financial results during the separation period.
The following presents the items which have been excluded from the normalised financial results:
* Barclays PLC contribution (including the endowment benefit)
* Hedging linked to separation activities
* Technology and brand separation projects
* Depreciation and amortisation on the aforementioned projects
* Transitional service payments to Barclays PLC
* Employee cost and benefits linked to separation activities
* Separation project execution and support cost.
Basis of presentation
The Group’s summary consolidated annual financial statements have been prepared in accordance with
the recognition and measurement requirements of IFRS, interpretations issued by the IFRS Interpretations
Committee (IFRS-IC), the South African Institute of Chartered Accountants’ Financial Reporting Guides
as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the Companies
Act. The principal accounting policies applied are set out in the Group’s most recent audited annual
consolidated financial statements.
The information disclosed in the SENS is derived from the information contained in the audited annual
consolidated financial statements and does not contain full or complete disclosure details. Any
investment decisions by shareholders should be based on consideration of the audited annual
consolidated financial statements, which is available on request. The presentation and disclosures
comply with IAS 34 International Accounting Standards Interim Financial Reporting (IAS 34).
The preparation of financial information requires the use of estimates and assumptions about future
conditions. Use of available information and application of judgement are inherent in the formation
of estimates. The accounting policies that are deemed critical to the Group’s results and financial
position, in terms of the materiality of the items to which the policies are applied, and which
involve a high degree of judgement including the use of assumptions and estimation, are impairment
of loans and advances, goodwill impairment, fair value measurements, impairment of available-for-sale
financial assets, consolidation of structured or sponsored entities, post-retirement benefits,
provisions, income taxes, share-based payments, liabilities arising from claims made under short-term
and long-term insurance contracts and offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the summary consolidated financial statements are the
same as those in place for the reporting period ended 31 December 2016 except for the adoption of
the own credit exemption of IFRS 9 Financial Instruments (IFRS 9), changes to the Group’s operating
segments and business portfolios changes between operating segments. Refer to note 15.
Standards issued not yet effective
IFRS 9 – Financial instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement with
effect from 1 January 2018. IFRS 9 includes revised requirements for the classification and measurement
of financial assets and liabilities, the impairment of financial assets and hedge accounting. BAGL will
not restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed
transitional disclosures in accordance with the amended requirements of IFRS 7 Financial Instruments:
Disclosures. Any change in the carrying value of financial instruments upon initial application of
IFRS 9 will be recognised in equity.
IFRS 9 introduces a revised impairment model which requires entities to recognise expected credit losses
(‘ECL’) based on unbiased forward-looking information. The measurement of expected loss will involve
increased complexity and judgment including estimation of lifetime probabilities of default, loss given
default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of
exposures at default and assessing increases in credit risk.
The revised impairment model is expected to have a material financial impact on the existing impairment
provisions previously recognised in terms of the requirements of IAS 39. It is estimated that the
increase on IAS 39 impairment stock (including contractual interest suspended) will be in the region
of 30%, on a pre-tax basis. Based on the current requirements of Basel III, the increase in the
accounting impairment provisions is not expected to reduce the Group’s Common Equity Tier 1 (CET1)
capital ratio by more than 35bps, on 1 January 2018, before taking into account the impact of the
regulatory transitional arrangement. Barclays Africa Group Limited has elected to utilise the
transition period of three years for phasing in the regulatory capital impact of IFRS 9. IFRS 9 has
been considered in the Group’s capital planning.
The reasons for the change in impairment provisions are:
* The removal of the emergence period that was necessitated by the incurred loss model of IAS 39. All
stage 1 assets will carry a 12 month expected credit loss provision. This differs from IAS 39 where
unidentified impairments were typically measured with an emergence period of between three to
twelve months.
* The provisioning for lifetime expected credit losses on stage 2 assets; where some of these assets
would not have attracted a lifetime expected credit loss measurement per IAS 39.
* The inclusion of forecasted macroeconomic scenarios into the expectation of credit losses;
* The inclusion of expected credit losses on items that would not have been impaired under IAS 39,
such as loan commitments and financial guarantees.
On initial adoption the new classification and measurement requirements under IFRS 9 will have an
insignificant impact on the retained income of the Group. The specific requirements of IFRS 9 relating
to the presentation of gains and losses on financial liabilities designated at fair value were early
adopted at the beginning of the current reporting period. The effects of changes in the credit risk
of these liabilities’ are therefore presented in other comprehensive income with the remaining effect
presented in profit or loss. The Group will continue to apply the rules under IAS 39 hedge accounting
until the project on accounting for macro hedging is completed, if not earlier.
IFRS 15 – Revenue from contracts with customers
Implementation efforts performed to date indicate that the adoption of IFRS 15 is not expected to have
a significant impact on the financial results of the Group.
Auditors' report
Ernst & Young Inc. (EY) and KPMG Inc (KPMG), Barclays Africa Group Limited's independent auditors,
have audited the consolidated annual financial statements of Barclays Africa Group Limited from which
management prepared the summary consolidated financial statements. The auditors have expressed an
unqualified audit opinion on the consolidated annual financial statements. The summary consolidated
financial statements comprise the summary consolidated statement of financial position at 31 December
2017, summary consolidated statement of comprehensive income, summary consolidated statement of changes
in equity and summary consolidated statement of cash flows for the reporting period then ended and
selected explanatory notes, excluding items not indicated as audited. The audit report of the
consolidated annual financial statements is available for inspection at Barclays Africa Group Limited's
registered office.
These summary annual consolidated financial statements (on pages 9-11 and 16-45) for the year ended
31 December 2017 have been audited by EY and KPMG, who expressed an unmodified opinion thereon. A
copy of the auditors’ report on the summary consolidated financial statements and of the auditors’
report on the annual financial statements are available for inspection at the Group’s registered
office, together with the financial statements identified in the respective auditor’s reports.
Events after the reporting period
The directors are not aware of any events after the reporting date of 31 December 2017 and the date
of authorisation of these summary consolidated annual financial statements as defined in IAS 10
Events after the Reporting Period (IAS 10).
On behalf of the Board
W E Lucas-Bull M Ramos
Group Chairman Chief Executive Officer
Johannesburg
28 February 2018
Declaration of final ordinary dividend number 63
Shareholders are advised that an ordinary dividend of 595 cents per ordinary share was declared
on 1 March 2018, for the period ended 31 December 2017. The ordinary dividend is payable to
shareholders recorded in the register of members of the Company at the close of business on
13 April 2018. The directors of Barclays Africa Group Limited confirm that the Group will
satisfy the solvency and liquidity test immediately after completion of the dividend
distribution.
The dividend will be subject to local dividends withholding tax at a rate of 20%. In accordance
with paragraphs 11.17 (a) (i) to (ix) and 11.17 (c) of the JSE Listings Requirements, the
following additional information is disclosed:
* The dividend has been declared out of income reserves.
* The local dividend tax rate is twenty per cent (20%).
* The gross local dividend amount is 595 cents per ordinary share for shareholders exempt from
the dividend tax.
* The net local dividend amount is 476 cents per ordinary share for shareholders liable to pay
the dividend tax.
* Barclays Africa Group Limited currently has 847 750 679 ordinary shares in issue (includes
14 912 864 treasury shares(1)).
* Barclays Africa Group Limited’s income tax reference number is 9150116714.
In compliance with the requirements of Strate, the electronic settlement and custody system used
by the JSE Limited, the following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Tuesday, 10 April 2018
Shares commence trading ex dividend Wednesday, 11 April 2018
Record date Friday, 13 April 2018
Payment date Monday, 16 April 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 11 April 2018
and Friday, 13 April 2018, both dates inclusive. On Monday, 16 April 2018, the dividend will be
electronically transferred to the bank accounts of certificated shareholders. The accounts of
those shareholders who have dematerialised their shares (which are held at their participant
or broker) will also be credited on Monday, 16 April 2018.
On behalf of the Board
N R Drutman
Group Company Secretary
Johannesburg
1 March 2018
Barclays Africa Group Limited is a company domiciled in South Africa. Its registered office is
7th Floor, Barclays Towers West, 15 Troye Street, Johannesburg, 2001.
Note
(1) Includes 13 089 157 shares of BAGL shares to be used in the furtherance of the Group’s objective
of establishing a BBBEE structure.
Consolidated IFRS salient features
2017 2016
Statement of comprehensive income (Rm)
Income 73 305 72 394
Operating expenses 43 304 39 956
Profit attributable to ordinary equity holders 13 823 14 708
Headline earnings (1) 14 313 14 980
Statement of financial position
Loans and advances to customers (Rm) 749 772 720 309
Total assets (Rm) 1 165 979 1 101 023
Deposits due to customers (Rm) 689 867 674 865
Loans to deposits and debt securities ratio (%) 90.6 88.4
Financial performance (%)
Return on equity (RoE) 14.2 16.6
Return on average assets (RoA) 1.27 1.34
Return on risk-weighted assets (RoRWA) 1.99 2.14
Non-performing loans (NPL) ratio on gross loans and advances 3.75 3.94
Operating performance (%)
Net interest margin on average interest-bearing assets 4.96 4.95
Credit loss ratio on gross loans and advances to customers and banks 0.87 1.08
Non-interest income as percentage of total income 41.8 42.0
Cost-to-income ratio 59.1 55.2
Jaws (7) 2
Effective tax rate 28.1 26.9
Share statistics (million)
Number of ordinary shares in issue 847.8 847.8
Number of ordinary shares in issue (excluding treasury shares) 832.8 846.7
Weighted average number of ordinary shares in issue 833.7 833.8
Diluted weighted average number of ordinary shares in issue 833.8 833.9
Share statistics (cents)
Headline earnings per ordinary share(HEPS)(2) 1 716.7 1 796.6
Diluted headline earnings per ordinary share(DHEPS)(2) 1 716.5 1 796.4
Basic earnings per ordinary share(EPS)(2) 1 657.8 1 764.0
Diluted basic earning per ordinary share(DEPS)(2) 1 657.6 1 763.8
Dividend per ordinary share relating to income for the reporting period 1 070 1 030
Dividend cover (times) 1.6 1.7
NAV per ordinary share 13 018 10 980
Tangible NAV per ordinary share 12 372 10 501
Capital adequacy (%)
Barclays Africa Group Limited 16.1 14.8
Absa Bank Limited 16.9 15.1
Common Equity Tier 1 (%)
Barclays Africa Group Limited 13.5 12.1
Absa Bank Limited 13.4 11.6
Notes
(1) After allowing for R362m (2016:R352m) profit attributable to preference equity holders and R48m (2016: Nil)
profit attributable to Additional Tier 1 Capital holders.
(2) As a result of the acquisition Barclays PLC of 12 716 260 (1,5%) BAGL shares in the current reporting period,
this has resulted in the restatement of treasury shares in 2016 which has an impact in the calculation of the
EPS, DEPS, HEPS and DHEPS.
Normalised salient features
2017 2016
Statement of comprehensive income (Rm)
Income 72 900 72 394
Operating expenses 41 403 39 956
Profit attributable to ordinary equity holders 15 305 14 708
Headline earnings(1) 15 558 14 980
Statement of financial position
Loans and advances to customers (Rm) 749 772 720 309
Total assets (Rm) 1 165 067 1 101 023
Deposits due to customers (Rm) 689 867 674 865
Loans to deposits and debt securities ratio (%) 90.6 88.4
Financial performance (%)
Return on equity (RoE) 16.4 16.6
Return on average assets (RoA) 1.38 1.34
Return on risk-weighted assets (RoRWA) 2.16 2.14
Non-performing loans (NPL) ratio on gross loans and advances 3.75 3.94
Operating performance (%)
Net interest margin on average interest-bearing assets 4.95 4.95
Credit loss ratio on gross loans and advances to customers and banks 0.87 1.08
Non-interest income as percentage of total income 41.9 42.0
Cost-to-income ratio 56.8 55.2
Jaws (3) 2
Effective tax rate 27.5 26.9
Share statistics (million)
Number of ordinary shares in issue 847.8 847.8
Number of ordinary shares in issue (excluding treasury shares) 845.6 846.7
Weighted average number of ordinary shares in issue 846.5 846.5
Diluted weighted average number of ordinary shares in issue 846.6 846.6
Share statistics (cents)
Headline earnings per ordinary share 1 837.9 1 769.6
Diluted headline earnings per ordinary share 1 837.7 1 769.4
Basic earnings per ordinary share 1 808.0 1 737.5
Diluted basic earning per ordinary share 1 807.8 1 737.3
Dividend per ordinary share relating to income for the reporting period 1 070 1 030
Dividend cover (times) 1.7 1.7
NAV per ordinary share 11 550 10 980
Tangible NAV per ordinary share 11 007 10 501
Capital adequacy (%)
Barclays Africa Group Limited 14.9 14.8
Absa Bank Limited 15.0 15.1
Common Equity Tier 1 (%)
Barclays Africa Group Limited 12.1 12.1
Absa Bank Limited 11.6 11.6
Note
(1) After allowing for R362m (2016:R351m) profit attributable to preference equity holders and R48m (2016: Nil)
profit attributable to Additional Tier 1 Capital holders.
IFRS Barclays Total Group
Group separation normalised
performance effect performance
Reconciliation of IFRS to normalised results 2017 2017 2017
Statement of comprehensive income (Rm)
Net interest income 42 644 325 42 319
Non-interest income 30 661 80 30 581
Total income 73 305 405 72 900
Impairment losses on loans and advances (7 022) - (7 022)
Operating expenses (43 304) (1 901) (41 403)
Other expenses (2 270) (394) (1 876)
Share of post-tax results of associates and joint ventures 170 - 170
Operating profit before income tax 20 879 (1 890) 22 769
Tax expenses (5 857) 408 (6 265)
Profit for the reporting period 15 022 (1 482) 16 504
Profit attributable to:
Ordinary equity holders 13 823 (1 482) 15 305
Non-controlling interest - ordinary shares 789 - 789
Non-controlling interest - preference shares 362 - 362
Non-controlling interest - additional Tier 1 48 - 48
15 022 (1 482) 16 504
Headline earnings 14 313 (1 245) 15 558
Operating performance (%)
Net interest margin on average interest-bearing
assets 4.96 n/a 4.95
Credit loss ratio on gross loans and advances
to customers and banks 0.87 n/a 0.87
Non-interest income as % of total income 41.8 n/a 41.9
Income growth 1 n/a 1
Operating expenses growth 8 n/a 4
Cost-to-income ratio 59.1 n/a 56.8
Effective tax rate 28.1 n/a 27.5
Statement of financial position (Rm)
Loans and advances to customers 749 772 - 749 772
Loans and advances to banks 55 426 - 55 426
Investment securities 111 409 - 111 409
Other assets 249 372 912 248 460
Total assets 1 165 979 912 1 165 067
Deposits due to customers 689 867 - 689 867
Debt securities in issue 137 948 - 137 948
Other liabilities(1) 219 104 (9 840) 228 944
Total liabilities 1 046 919 (9 840) 1 056 759
Equity 119 060 10 752 108 308
Total equity and liabilities 1 165 979 912 1 165 067
Key performance ratios (%)
RoA 1.27 n/a 1.38
RoE 14.2 n/a 16.4
Capital adequacy 16.1 n/a 14.9
Common Equity Tier 1 13.5 n/a 12.1
Share statistics (cents)
Diluted headline earnings per ordinary share 1 716.5 n/a 1 837.7
Note
(1) This presents the contribution received from Barclays PLC, net of amounts already spent on separation
activities. The cash received is held centrally by Treasury and is presented as an intersegmental asset
in “Other liabilities”.
Summary Consolidated Statement of Financial Position
as at 31 December
2017 2016
Note Rm Rm
Assets
Cash, cash balances and balances with central banks 48 669 50 006
Investment securities 111 409 114 315
Loans and advances to banks 55 426 49 789
Trading portfolio assets 132 183 96 236
Hedging portfolio assets 2 673 1 745
Other assets 20 960 25 542
Current tax assets 314 894
Non-current assets held for sale 1 1 308 823
Loans and advances to customers 2 749 772 720 309
Reinsurance assets 892 985
Investments linked to investment contracts 18 936 18 816
Investments in associates and joint ventures 1 235 1 065
Investment properties 231 478
Property and equipment 15 303 14 643
Goodwill and intangible assets 5 377 4 049
Deferred tax assets 1 291 1 328
Total assets 1 165 979 1 101 023
Liabilities
Deposits from banks 67 390 53 192
Trading portfolio liabilities 64 047 47 429
Hedging portfolio liabilities 1 123 2 064
Other liabilities 31 744 27 696
Provisions 3 041 3 005
Current tax liabilities 57 244
Non-current liabilities held for sale 1 48 9
Deposits due to customers 689 867 674 865
Debt securities in issue 137 948 139 714
Liabilities under investment contracts 30 585 29 198
Policyholder liabilities under insurance contracts 4 617 4 469
Borrowed funds 3 15 895 15 673
Deferred tax liabilities 557 1 185
Total liabilities 1 046 919 998 743
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 666 1 693
Share premium 10 498 4 467
Retained earnings 91 882 81 604
Other reserves 4 370 5 293
108 416 93 057
Non-controlling interest - ordinary shares 4 500 4 579
Non-controlling interest - preference shares 4 644 4 644
Non-controlling interest - Additional Tier 1 Capital 1 500 -
Total equity 119 060 102 280
Total liabilities and equity 1 165 979 1 101 023
Summary Consolidated Statement of Comprehensive Income
For the reporting period ended 31 December
2017 2016
Note Rm Rm
Net interest income 42 644 42 003
Interest and similar income 85 929 85 114
Interest expense and similar charges (43 285) (43 111)
Non-interest income 30 661 30 391
Net fee and commission income 21 711 20 723
Fee and commission income 24 724 23 972
Fee and commission expense (3 013) (3 249)
Net insurance premium income 6 598 6 986
Net claims and benefits incurred on insurance contracts (3 334) (3 691)
Changes in investment and insurance contract liabilities (2 113) (493)
Gains and losses from banking and trading activities 5 246 5 691
Gains and losses from investment activities 1 905 51
Other operating income 648 1 124
Total income 73 305 72 394
Impairment losses on loans and advances (7 022) (8 751)
Operating income before operating expenditure 66 283 63 643
Operating expenditure (43 304) (39 956)
Other expenses (2 270) (2 120)
Other impairments 4 (648) (690)
Indirect taxation (1 622) (1 430)
Share of post-tax results of associates and joint ventures 170 115
Operating profit before income tax 20 879 21 682
Taxation expense (5 857) (5 835)
Profit for the reporting period 15 022 15 847
Profit attributable to:
Ordinary equity holders 13 823 14 708
Non-controlling interest - ordinary shares 789 788
Non-controlling interest - preference shares 362 351
Non-controlling interest - Additional Tier 1 Capital 48 -
15 022 15 847
Earnings per share:
Basic earnings per share (cents) 1 657.8 1 764.0
Diluted earnings per share (cents) 1 657.6 1 763.8
Summary Consolidated Statement of Other Comprehensive Income
for the reporting period ended 31 December
2017 2016
Rm Rm
Profit for the reporting period 15 022 15 847
Other comprehensive income
Items that will not be reclassified to profit or loss (179) (220)
Fair value losses arising from changes in own credit risk
on liabilities measured at fair value through profit or loss (147) -
Movement in retirement benefit fund assets and liabilities (32) (220)
Decrease in retirement benefit surplus (91) (120)
Decrease/(increase) in retirement benefit deficit 45 (141)
Deferred tax 14 41
Items that are or may be subsequently reclassified to
profit or loss (1 327) (2 942)
Movement in foreign currency translation reserve (2 219) (4 529)
Differences in translation of foreign operations (2 271) (4 209)
Release to profit or loss 52 (320)
Movement in cash flow hedging reserve 794 1 726
Fair value gains 1 465 2 721
Amount removed from other comprehensive income and
recognised in profit or loss (365) (321)
Deferred tax (306) (674)
Movement in available-for-sale reserve 98 (139)
Fair value gains/(losses) 154 (197)
Released to profit or loss 67 (3)
Deferred tax (123) 61
Total comprehensive income for the reporting period 13 516 12 685
Total comprehensive income attributable to:
Ordinary equity holders 12 590 11 931
Non-controlling interest - ordinary shares 516 403
Non-controlling interest - preference shares 362 351
Non-controlling interest - Additional Tier 1 Capital 48 -
13 516 12 685
Summary consolidated statement of changes in equity
2017
Number
of
ordinary Share Share Retained
shares capital premium earnings
’000 Rm Rm Rm
Balance at the beginning of the reporting period 846 675 1 693 4 467 81 604
Total comprehensive income - - - 13 650
Profit for the period - - - 13 823
Other comprehensive income - - - (173)
Dividends paid during the reporting period - - - (8 821)
Distributions paid during the reporting period - - - -
Issuance of Additional Tier 1 Capital - - - -
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - (741) 12
Elimination of the movement in treasury shares held
by Group entities (13 837) (27) (2 385) -
Movement in share-based payment reserve - - 742 -
Transfer from share-based payment reserve - - 742 -
Value of employee services - - - -
Deferred tax - - - -
Movement in general credit risk reserve - - - (22)
Share of post-tax results of associates and - - - (170)
joint ventures
Disposal of non-controlling interest(1) - - - -
Barclays separation(2) - - 8 415 3 690
Barclays separation - Empowerment Trust(3) - - - 1 891
Shareholder contribution - fair value of investment(4) - - - 48
Balance at the end of the reporting period 832 838 1 666 10 498 91 882
Summary consolidated statement of changes in equity cont.
2017
Total General Available-
other credit risk for-sale
reserves reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period 5 293 757 377
Total comprehensive income (1 060) - 68
Profit for the period - - -
Other comprehensive income (1 060) - 68
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - -
Elimination of the movement in treasury shares
held by Group entities - - -
Movement in share-based payment reserve (55) - -
Transfer from share-based payment reserve (742) - -
Value of employee services 655 - -
Deferred tax 32 - -
Movement in general credit risk reserve 22 22 -
Share of post-tax results of associates and
joint ventures 170 - -
Disposal of non-controlling interest(1) - - -
Barclays separation(2) - - -
Barclays separation - Empowerment Trust(3) - - -
Shareholder contribution - fair value
of investment(4) - - -
Balance at the end of the reporting period 4 370 779 445
Summary consolidated statement of changes in equity cont.
2017
Cash flow Foreign currency Foreign insurance
hedging translation subsidiary regulatory
reserve reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period (144) 2 353 6
Total comprehensive income 794 (1 922) -
Profit for the period - - -
Other comprehensive income 794 (1 922) -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital
Purchase of Group shares in respect of - - -
equity-settled share-based payment arrangements
Elimination of the movement in treasury shares
held by Group entities - - -
Movement in share-based payment reserve - - -
Transfer from share-based payment reserve - - -
Value of employee services - - -
Deferred tax - - -
Movement in general credit risk reserve - - -
Share of post-tax results of associates and
joint ventures - - -
Disposal of non-controlling interest(1) - - -
Barclays separation(2) - - -
Barclays separation - Empowerment Trust(3) - - -
Shareholder contribution - fair value of investment(4) - - -
Balance at the end of the reporting period 650 431 6
Summary consolidated statement of changes in equity cont.
2017
Share-based Associates’ and Capital and reserves
payment joint ventures' attributable to ordinary
reserve reserve equity holders
Rm Rm Rm
Balance at the beginning of the reporting period 892 1 052 93 057
Total comprehensive income - - 12 590
Profit for the period - - 13 823
Other comprehensive income - - (1 233)
Dividends paid during the reporting period - - (8 821)
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Group shares in respect of - - (729)
equity-settled share-based payment arrangements
Elimination of the movement in treasury shares
held by Group entities - - (2 412)
Movement in share-based payment reserve (55) - 687
Transfer from share-based payment reserve (742) - -
Value of employee services 655 - 655
Deferred tax 32 - 32
Movement in general credit risk reserve - - -
Share of post-tax results of associates and
joint ventures - 170 -
Disposal of non-controlling interest(1) - - -
Barclays separation(2) - - 12 105
Barclays separation - Empowerment Trust(3) - - 1 891
Shareholder contribution - fair value
of investment(4) - - 48
Balance at the end of the reporting period 837 1 222 108 416
Summary consolidated statement of changes in equity cont.
2017
Non-controlling Non-controlling Non-controlling
interest - interest - interest -
ordinary preference Additional Total
shares shares Tier 1 Capital(5) equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 4 579 4 644 - 102 280
Total comprehensive income 516 362 48 13 516
Profit for the period 789 362 48 15 022
Other comprehensive income (273) - - (1 506)
Dividends paid during the reporting period (567) (362) - (9 750)
Distributions paid during the reporting period - - (48) (48)
Issuance of Additional Tier 1 Capital - - 1 500 1 500
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - - (729)
Elimination of the movement in treasury shares held
by Group entities - - - (2 412)
Movement in share-based payment reserve (4) - - 683
Transfer from share-based payment reserve - - - -
Value of employee services (4) - - 651
Deferred tax - - - 32
Movement in general credit risk reserve - - - -
Share of post-tax results of associates and
joint ventures - - - -
Disposal of non-controlling interest(1) (24) - - (24)
Barclays separation(2) - - - 12 105
Barclays separation - Empowerment Trust(3) - - - 1 891
Shareholder contribution - fair value of
investment(4) 48
Balance at the end of the reporting period 4 500 4 644 1 500 119 060
Notes
(1) The Group disposed of its controlling stake in a non-core subsidiary which was classified as held for sale.
(2) As part of the disinvestment, Barclays PLC contributed R12.1bn in recognition of the investments required for
the Group to separate from Barclays PLC. The contribution meets the definition of a transaction with a
shareholder.
(3) As part of the separation, Barclays PLC contributed cash of R 1 891m to the independent Absa Empowerment Trust
to allow for its subsidiary to purchase 12 716 260 BAGL shares (1.5%) in the furtherance of the Group’s objective
of establishing a Broad-Based Black Empowerment structure. In terms of the requirements of IFRS, these shares have
been accounted for as treasury shares and eliminated against the Group’s share capital.
(4) CLS Group Holding AG shares were transferred to Barclays PLC for no consideration in 2005. During the current
reporting period these shares were transferred back to the Group for a nominal consideration of one British Pound
Sterling (GBP). The shares have been recognised at a fair value of R48m. The related credit has been recognised in
equity as a shareholder contribution.
(5) The Additional Tier 1 Capital notes represent perpetual, subordinated instruments redeemable in full at the
option of Barclays Africa Group Limited (the issuer) on 12 September 2022 subject to regulatory approval. Interest
is paid at the discretion of the issuer and is non-cumulative. In addition, if certain conditions are reached, the
regulator may prohibit the issuer from making interest payments. Accordingly, the instruments are classified as equity
instruments.
Summary consolidated statement of changes in equity
2016
Number
of
ordinary Share Share Retained
shares capitl premium earnings
’000 Rm Rm(1) Rm
Balance at the beginning of the reporting period 845 725 1 691 4 250 75 785
Total comprehensive income - - - 14 496
Profit for the period - - - 14 708
Other comprehensive income - - - (212)
Dividends paid during the reporting period - - - (8 536)
Distributions paid during the reporting period - - - -
Issuance of Additional Tier 1 Capital
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - (409) (12)
Elimination of the movement in treasury shares held
by Group entities 950 2 151 -
Movement in share-based payment reserve - - 409 -
Transfer from share-based payment reserve - - 409 -
Value of employee services - - - -
Conversion from cash-settled to equity-settled schemes - - - -
Deferred tax - - - -
Movement in general credit risk reserve - - - (30)
Movement in foreign insurance subsidiary regulatory reserve - - - 16
Share of post-tax results of associates and joint ventures - - - (115)
Acquisition of subsidiaries(1),(2) - - 66 -
Disposal of non-controlling interest - - - -
Non-controling interest arising from business combinations - - - -
Barclays separation - - - -
Contribution of share by Barclays PLC - - - -
Balance at the end of the reporting period 846 675 1 693 4 467 81 604
Summary consolidated statement of changes in equity cont.
2016
Total General Available-
other credit risk for-sale
reserves reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period 7 566 727 560
Total comprehensive income (2 565) - (183)
Profit for the period - - -
Other comprehensive income (2 565) - (183)
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - -
Elimination of the movement in treasury shares held
by Group entities - - -
Movement in share-based payment reserve 163 - -
Transfer from share-based payment reserve (409) - -
Value of employee services 495 - -
Conversion from cash-settled to equity-settled schemes 37 - -
Deferred tax 40 - -
Movement in general credit risk reserve 30 30 -
Movement in foreign insurance subsidiary regulatory reserve (16) - -
Share of post-tax results of associates and joint ventures 115 - -
Acquisition of subsidiaries(1),(2) - - -
Disposal of non-controlling interest - - -
Non-controling interest arising from business combinations - - -
Barclays separation - - -
Contribution of share by Barclays PLC - - -
Balance at the end of the reporting period 5 293 757 377
Summary consolidated statement of changes in equity cont.
2016
Cash flow Foreign currency Foreign insurance
hedging translation subsidiary regulatory
reserve reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period (1 870) 6 461 22
Total comprehensive income 1 726 (4 108) -
Profit for the period - - -
Other comprehensive income 1 726 (4 108) -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - -
Elimination of the movement in treasury shares held
by Group entities - - -
Movement in share-based payment reserve - - -
Transfer from share-based payment reserve - - -
Value of employee services - - -
Conversion from cash-settled to equity-settled schemes - - -
Deferred tax - - -
Movement in general credit risk reserve - - -
Movement in foreign insurance subsidiary regulatory reserve - - (16)
Share of post-tax results of associates and joint ventures - - -
Acquisition of subsidiaries(1),(2) - - -
Disposal of non-controlling interest - - -
Non-controling interest arising from business combinations - - -
Barclays separation - - -
Contribution of share by Barclays PLC - - -
Balance at the end of the reporting period (144) 2 353 6
Summary consolidated statement of changes in equity cont.
2016
Share-based Associates’ and Capital and reserves
payment joint ventures' attributable to ordinary
reserve reserve equity holders
Rm Rm Rm
Balance at the beginning of the reporting period 729 937 89 292
Total comprehensive income - - 11 931
Profit for the period - - 14 708
Other comprehensive income - - (2 777)
Dividends paid during the reporting period - - (8 536)
Distributions paid during the reporting period - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Group shares in respect of equity-settled
share-based payment arrangements - - -
Elimination of the movement in treasury shares
held by Group entities - - (421)
- - 153
Movement in share-based payment reserve 163 - 572
Transfer from share-based payment reserve (409) - -
Value of employee services 495 - 495
Conversion from cash-settled to equity-settled schemes 37 - 37
Deferred tax 40 - 40
Movement in general credit risk reserve - - -
Movement in foreign insurance subsidiary regulatory reserve - - -
Share of post-tax results of associates and joint ventures - 115 -
Acquisition of subsidiaries(1),(2) - - 66
Disposal of non-controlling interest - - -
Non-controling interest arising from business combinations - - -
Barclays separation - - -
Contribution of share by Barclays PLC - - -
Balance at the end of the reporting period 892 1 052 93 057
Summary consolidated statement of changes in equity cont.
2016
Non-controlling Non-controlling Non-controlling
interest - interest - interest -
ordinary preference Additional Total
shares shares Tier 1 Capital(5) equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 4 711 4 644 - 98 647
Total comprehensive income 403 351 - 12 685
Profit for the period 788 351 - 15 847
Other comprehensive income (385) - - (3 162)
Dividends paid during the reporting period (562) (351) - (9 449)
Distributions paid during the reporting period - - - -
Issuance of Additional Tier 1 Capital - - - -
Purchase of Group shares in respect of
equity-settled share-based payment arrangements - - - -
- - - (421)
Elimination of the movement in treasury shares held
by Group entities - - - 153
Movement in share-based payment reserve 2 - - 574
Transfer from share-based payment reserve - - - -
Value of employee services 2 - - 497
Conversion from cash-settled to equity-settled schemes - - - 37
Deferred tax - - - 40
Movement in general credit risk reserve - - - -
Movement in foreign insurance subsidiary regulatory reserve - - - -
Share of post-tax results of associates and joint ventures - - - -
Acquisition of subsidiaries(1),(2) 25 - - 91
Disposal of non-controlling interest - - - -
Non-controling interest arising from business combinations - - - -
Barclays separation - - - -
Contribution of share by Barclays PLC - - - -
Balance at the end of the reporting period 4 579 4 644 - 102 280
Notes
(1) The excess of the purchase price over the Group’s share of net assets of Barclays Africa Limited, acquired on
31 July 2013, was accounted for as a deduction against share premium. The sale and purchase agreement between the
Group and Barclays Bank Plc allowed for the purchase price to be adjusted for certain items and in June 2016 an
agreement was reached on the final purchase price adjustment. As a result Barclays Bank Plc paid R66m to the Group,
which was recognised in equity, in line with the accounting of the original transaction.
(2) During the previous reporting period the Group acquired a 75% controlling stake in Absa Instant Life (Pty) Ltd
which resulted in a R25m increase in non-controlling interest.
Summary consolidated statement of cash flows
2017 2016
Note Rm Rm
Net cash (utilised in)/generated from operating activites (534) 6 962
Net cash utilised in investing activities (2 634) (4 201)
Net cash generated from/(utilised in) financing activities 2 593 (7 509)
Net cash generated from Barclays separation 12 105 -
Net cash utilised in other financing activities (9 512) (7 509)
Net decrease in cash and cash equivalents (575) (4 748)
Cash and cash equivalents at the beginning of the reporting period 1 17 734 21 366
Effect of foreign exchange rate movements on cash and cash equivalents 161 1 116
Cash and cash equivalents at the end of the reporting period 2 17 320 17 734
Notes to the summary consolidated statement of cash flows
1. Cash and cash equivalents at the beginning of the reporting period
Cash, cash balances and balances with central banks(1) 13 141 12 899
Loans and advances to banks(2) 4 593 8 467
17 734 21 366
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(1) 13 518 13 141
Loans and advances to banks(2) 3 802 4 593
17 320 17 734
Notes
(1) Includes coins and bank notes.
(2) Includes call advances, which are used as working capital by the Group.
1. Non-current assets and non-current liabilities held for sale
The following movements in non-current assets and non-current liabilities held for sale were effected during the
current financial reporting period:
- Retail Banking South Africa transferred loans and advances to customers of R1 118m and property and equipment of
R1m to non-current assets held for sale. The Commercial Property Finance (CPF) Equity division in Business
Banking South Africa disposed of a subsidiary with assets of R373m and liabilities of R26m out of non-current
assets and non-current liabilities held for sale respectively. Business Banking South Africa further disposed of
two investment properties with a total carrying value of R475m.
- Rest of Africa banking transferred property with a carrying value of R3m to non-current assets held for sale.
- CIB South Africa transferred investment securities with a carrying value of R547m to non-current assets held for
sale. Prior to its disposal at a carrying value of R467m, a negative fair value adjustment of R80m was applied to
the investment securities.
- WIMI transferred two subsidiaries to non-current assets and non-current liabilities held for sale. The subsidiaries
held assets of R139m and R14m, and liabilities of R34m and R14m respectively.
The following movements in non-current assets and non-current liabilities held for sale were effected during the
previous financial reporting period:
- RBB South Africa transferred investment properties with a total carrying value of R456m and a subsidiary with total
assets of R367m and total liabilities of R9m to non-current assets and non-current liabilities held for sale. The
Commercial Property Finance (CPF) Equity division disposed of an investment security and investment property with a
carrying value of R15m and R64m respectively.
- Head Office, Treasury and other operations in South Africa disposed of property and equipment with a carrying value
of R94m.
- WIMI transferred a consolidated structured entity with total assets of R245m and total liabilities of R233m out of
non-current assets and non-current liabilities held for sale. This was done following a reassessment by management
of the time expected to be taken to effect disposal.
- CIB South Africa transferred investment securities with a carrying value of R1 136m out of non-current assets held
for sale. This was done following a change in management intention with regards to disposal.
2. Loans and advances
2017
Performing loans
Exposure Impairment Coverage ratio
Loans and advances Rm Rm %
South Africa Banking 655 131 4 556 0.70
RBB South Africa 436 694 3 997 0.92
Retail Banking South Africa 374 761 3 223 0.86
Credit cards 34 505 729 2.11
Instalment credit agreements 76 498 698 0.91
Loans to associates and joint ventures 23 037 - -
Mortgages 215 467 1 124 0.52
Other loans and advances 739 - -
Overdrafts 5 348 71 1.33
Personal and term loans 19 167 601 3.14
Business Banking South Africa 61 933 774 1.25
Mortgages (including CPF) 26 158 141 0.54
Overdrafts 19 863 396 1.99
Term loans 15 912 237 1.49
CIB South Africa 218 437 559 0.26
Rest of Africa Banking 76 738 981 1.28
WIMI 4 930 13 0.26
Head Office, Treasury and other operations in South Africa 956 10 1.05
Loans and advances to customers 737 755 5 560 0.75
Loans and advances to banks 55 426 - -
793 181 5 560 0.70
2017
Non-performing loans
Exposure Impairment Coverage ratio
Loans and advances Rm Rm %
South Africa Banking 25 887 10 503 40.57
RBB South Africa 23 868 9 671 40.52
Retail Banking South Africa 20 534 8 576 41.76
Credit cards 5 053 3 605 71.34
Instalment credit agreements 2 362 1 117 47.29
Loans to associates and joint ventures - - -
Mortgages 10 353 2 073 20.02
Other loans and advances - - -
Overdrafts 383 215 56.14
Personal and term loans 2 383 1 566 65.72
Business Banking South Africa 3 334 1 095 32.84
Mortgages (including CPF) 1 477 519 35.12
Overdrafts 1 082 374 34.57
Term loans 775 202 26.08
CIB South Africa 2 019 832 41.21
Rest of Africa Banking 4 742 2 636 55.59
WIMI 262 175 66.79
Head Office, Treasury and other operations in South Africa - - -
Loans and advances to customers 30 891 13 314 43.10
Loans and advances to banks - - -
30 891 13 314 43.10
2017
Net total exposure
Loans and advances Rm
South Africa Banking 665 959
RBB South Africa 446 895
Retail Banking South Africa 383 497
Credit cards 35 224
Instalment credit agreements 77 045
Loans to associates and joint ventures 23 037
Mortgages 222 623
Other loans and advances 739
Overdrafts 5 445
Personal and term loans 19 383
Business Banking South Africa 63 398
Mortgages (including CPF) 26 975
Overdrafts 20 175
Term loans 16 248
CIB South Africa 219 065
Rest of Africa Banking 77 863
WIMI 5 004
Head Office, Treasury and other operations in South Africa 946
Loans and advances to customers 749 772
Loans and advances to banks 55 426
805 198
2. Loans and advances
2016(1)
Performing loans
Exposure Impairment Coverage ratio
Loans and advances Rm Rm %
South Africa Banking 626 700 4 707 0.75
RBB South Africa 425 122 4 063 0.96
Retail Banking South Africa 366 861 3 290 0.90
Credit cards 34 802 728 2.09
Instalment credit agreements 73 530 735 1.00
Loans to associates and joint ventures 18 933 - -
Mortgages 216 955 1 213 0.56
Other loans and advances 510 - -
Overdrafts 3 923 54 1.38
Personal and term loans 18 208 560 3.08
Business Banking South Africa 58 261 773 1.33
Mortgages (including CPF) 24 638 158 0.64
Overdrafts 18 307 366 2.00
Term loans 15 316 249 1.63
CIB South Africa 201 578 644 0.32
Rest of Africa Banking 75 991 1 246 1.64
WIMI 5 615 14 0.25
Head Office, Treasury and other
operations in South Africa 622 4 0.64
Loans and advances to customers 708 928 5 971 0.84
Loans and advances to banks 49 790 - -
758 718 5 971 0.79
2016
Non-performing loans
Exposure Impairment Coverage ratio
Loans and advances Rm Rm %
South Africa Banking 25 719 11 001 42.77
RBB South Africa 23 454 9 817 41.86
Retail Banking South Africa 20 166 8 655 42.92
Credit cards 5 423 3 883 71.60
Instalment credit agreements 2 085 925 44.36
Loans to associates and joint ventures - - -
Mortgages 10 029 2 109 21.03
Other loans and advances - - -
Overdrafts 220 142 64.55
Personal and term loans 2 409 1 596 66.25
Business Banking South Africa 3 288 1 162 35.34
Mortgages (including CPF) 1 567 536 34.21
Overdrafts 929 421 45.32
Term loans 792 205 25.88
CIB South Africa 2 265 1 184 52.27
Rest of Africa Banking 5 262 2 687 51.06
WIMI 116 57 49.14
Head Office, Treasury and other operations
in South Africa - - -
Loans and advances to customers 31 097 13 745 44.20
Loans and advances to banks - - -
31 097 13 745 44.20
2016(1)
Net total exposure
Loans and advances Rm
South Africa Banking 636 711
RBB South Africa 434 696
Retail Banking South Africa 375 082
Credit cards 35 614
Instalment credit agreements 73 955
Loans to associates and joint ventures 18 933
Mortgages 223 662
Other loans and advances 510
Overdrafts 3 947
Personal and term loans 18 461
Business Banking South Africa 59 614
Mortgages (including CPF) 25 511
Overdrafts 18 449
Term loans 15 654
CIB South Africa 202 015
Rest of Africa Banking 77 320
WIMI 5 660
Head Office, Treasury and other operations in South Africa 618
Loans and advances to customers 720 309
Loans and advances to banks 49 790
770 099
3. Borrowed funds
During the reporting period the significant movements in borrowed funds were as follows: R2 841m
(31 December 2016: R2 381m) of subordinated notes were issued and R2 805m (31 December 2016: R178m)
were redeemed.
4. Other impairments
2017 2016
Rm Rm
Impairment/(Reversal) raised on financial instruments 5 (4)
Other 643 694
Goodwill 38 34
Intangible assets(2) 384 618
Investments in associates and joint ventures - 42
Property and equipment(3) 221 -
648 690
Notes
(1) These numbers have been restated. Refer to the reporting changes overview in note 15.
(2) The impairments incurred during the current reporting period mainly relates to computer software,
Barclays.Net which was fully impaired. The prior period impairments relate to an acquired customer
list which was fully impaired following an adjustment to the interest rate outlook for the related
business and impairment of costs previously spent on the Virtual Bank initiative. In calculating
the impairment to be recognised, the value in use was based on a discounted cash flow methodology.
(3) During the current reporting period management have decided to dispose of certain property and
equipment resulting in an impairment of R221m.
5. Headline earnings
2017 2016
Gross Net(1) Gross Net(1)
Rm Rm Rm Rm
Headline earnings are determined as follows:
Profit attributable to ordinary equity holders of the Group 13 823 14 708
Total headline earnings adjustment: 490 272
IFRS 3 - Goodwill impairment 38 38 34 34
IFRS 5 - Loss/(gain) on disposal of non-currents assets held for sale 36 39 (31) (25)
IAS 16 - Profit on disposal of property and equipment (43) (34) (29) (21)
IAS 21 - Recycled foreign currency translation reserve 52 52 (320) (297)
IAS 28 - Impairment of investments in associates and joint ventures - - 42 34
IAS 36 - Impairment of property and equipment 221 159 - -
IAS 36 - Impairment of intangible assets 384 280 618 610
IAS 39 - Release of available-for-sale reserves 67 49 (3) (2)
IAS 40 - Change in fair value of investment properties (105) (88) (70) (61)
IAS 40 - Profit on disposal of investment property (5) (5) - -
Headline earnings/diluted headline earnings 14 313 14 980
Headline earnings per share (cents) 1 716.7 1 796.6
Diluted headline earnings per share (cents) 1 716.5 1 796.4
IAS 33 Earnings per share prescribes that the weighted average number of shares outstanding during a reporting period,
and for all periods presented, should be adjusted for events that change the number of ordinary shares outstanding without
a corresponding change in resources. The contribution of BAGL shares from Barclays PLC did not result in an adjustment to
the net asset value of the Group. Refer to note 8. The weighted average number of shares outstanding in 2016 has been
restated to reflect the acquisition from Barclays PLC of 12 716 260 (1.5%) BAGL shares to the Group in the current
reporting period. The acquisition of shares by Barclays PLC has been treated as treasury shares of the Group from the
beginning of 2016, which has led to a reduction in the number of ordinary shares outstanding for the purposes of determining
the weighted average number of shares in the Headline Earnings Per Share and Diluted Headline Earnings Per Share.
Note
(1) The net amount is reflected after taxation and non-controlling interest.
6. Dividends per share
2017 2016
Rm Rm
Dividends declared to ordinary equity holders
Interim dividend (28 July 2017: 475 cents) (29 July 2016: 460 cents) 4 027 3 900
Final dividend (1 March 2018: 595 cents) (23 February 2017: 570 cents) 5 044 4 832
9 071 8 732
Dividends declared to ordinary equity holders (net of treasury shares)
Interim dividend (28 July 2017: 475 cents) (29 July 2016: 460 cents) 4 024 3 888
Final dividend (1 March 2018: 595 cents) (23 February 2017: 570 cents) 4 955 4 820
8 979 8 708
Dividends declared to non-controlling preference equity holders
Interim dividend (28 July 2017: 3 684,06849 cents) (29 July 2016: 3 696,57534 cents) 182 183
Final dividend (1 March 2018: 3 558,01 cents) (23 February 2017: 3 644,79452 cents) 176 180
358 363
Distributions declared to Additional Tier 1 Capital note holders
Distribution (12 December 2017) 48 -
48 -
Dividends paid to ordinary equity holders (net of treasury shares)(1),(2)
Final dividend (10 April 2017: 570 cents) (11 April 2016: 550 cents) 4 832 4 648
Interim dividend (11 September 2017: 475 cents) (12 September 2016: 460 cents) 3 989 3 888
8 821 8 536
Dividends paid to non-controlling preference equity holders(2)
Final dividend (10 April 2017: 3 644,79452 cents) (11 April 2016: 3 395,47945 cents) 180 168
Interim dividend (11 September 2017: 3 684,06849 cents) (12 September 2016: 3 696,57534 cents) 182 183
362 351
Distributions paid to Additional Tier 1 Capital note holders
Distribution (12 December 2017) 48 -
48 -
Notes
(1) The dividends paid on treasury shares are calculated on payment date.
(2) The dividend paid dates have been corrected to reflect date of payment. Previously these dates referred to date of
declaration.
7. Acquisitions and disposals of businesses and other similar transactions
7.1.1 Acquisitions of businesses during the current reporting period
There were no acquisitions of businesses during the current reporting period.
7.1.2 Disposals of businesses during the current reporting period
Apart from the businesses classified as non-current assets/liabilities held for sale and disposed of (refer to note 1) there
were no other disposals of businesses that were finalised during the current reporting period. The cash consideration received
on disposals included in non-current assets/liabilities held for sale was R205m.
7.2.1 Acquisitions of businesses during the previous reporting period
In order to continue building and shaping the Group’s predictive underwriting products, expertise and technology, the Group
acquired a 75% controlling stake in Absa Instant Life Proprietary Limited, previously known as Instant Life Proprietary Limited.
The investment had an effective acquisition date of 31 March 2016 and is a business combination within the scope of IFRS 3. The
acquisition date fair value of the consideration transferred amounted to R100m.
The non-controlling interest below was measured at their proportionate share of the acquiree’s identifiable net assets. Goodwill
of R20m has been recognised and includes, but is not limited to, the insurer’s workforce and the increased market share gained.
From the date of acquisition, Absa Instant Life contributed revenue of R9m to the total income earned by the Group. If the
combination had taken place at the beginning of the year, an additional R5m would have been generated by the Group, thereby
resulting in a total income of R14m. From the date of acquisition, Absa Instant Life contributed losses after tax of R12m to total
profits earned by the Group. If the combination had taken place at the beginning of the year, losses after tax of an additional
R3m would have been incurred by the Group, thereby resulting in a total loss after tax of R15m.
Instant Life Group
2016
Fair value recognised on
acquisition
Rm Rm
Consideration at date of acquisition:
Cash 100 100
Total consideration 100 100
Recognised amounts of identifiable assets acquired and liabilities
assumed
Loans and advances to banks 6 6
Other assets 14 14
Intangible assets 125 125
Other liabilities (5) (5)
Deferred tax liabilities (32) (32)
Provisions (1) (1)
Total identifiable net assets 107 107
Total non-controlling interest (27) (27)
Goodwill 20 20
Total 100 100
A summary of the total net cash outflow and cash and cash equivalents related to acquisitions and disposals of
businesses and other similar transactions is included below:
2017 2016
Rm Rm
Summary of net cash outflow due to acquisitions - 100
7.2.2 Disposals of businesses during the previous reporting period
There were no disposals of businesses during the previous reporting period.
8. Related parties
As part of the separation, Barclays PLC sold ordinary Barclays Africa Group Limited shares representing 12.2%
and 33.7% of issued ordinary share capital in May 2016 and June 2017 respectively. Barclays PLC currently holds
126.2m ordinary Barclays Africa Group shares representing 14.9% of issued ordinary shares. The remaining 85.1% of
the shares are widely held on the JSE.
Barclays PLC contributed £765 million to the Group, primarily in recognition of the investments required for the
Group to separate from Barclays PLC. This contribution will be invested primarily in rebranding, technology and
separation-related projects and it is expected that it will neutralise the capital and cash flow impact of separation
investments on the Group over time.
Barclays PLC contributed cash of R1 891m to be used in the furtherance of the Group’s objective of establishing
Broad-Based Black Empowerment structure. The cash was contributed to the independent Absa Empowerment Trust, whose
subsidiary purchased 12 716 260 BAGL shares. In terms of the requirements of IFRS, these shares have been accounted
for as treasury shares and eliminated against the Group’s share capital.
CLS Group Holding AG shares were transferred to Barclays PLC for no consideration in 2005. During the current
reporting period these shares were transferred back to the Group for a nominal consideration of one British Pound
(GBP). The shares have been recognised at a fair value of R48m. The related credit has been recognised in equity as
a shareholder contribution.
9. Financial guarantee contracts
2017 2016
Rm Rm
Financial guarantee contracts 10 10
Financial guarantee contracts represent contracts where the Group undertakes to make specified payments to a
counterparty, should the counterparty suffer a loss as a result of a specified debtor failing to make payment when
due in accordance with the terms of a debt instrument. This amount represents the maximum off-statement of financial
position exposure.
10. Commitments
Rm Rm
Authorised capital expenditure
Contracted but not provided for 270 521
The Group has capital commitments in respect of computer equipment, software and property
development. Management is confident that future net revenues and funding will be sufficient
to cover these commitments.
Operating lease payments due
No later than one year 1 365 1 309
Later than one year and no later than five years 3 056 2 946
Later than five years 948 1 228
5 369 5 483
The operating lease commitments comprise a number of separate operating leases in relation to property and equipment,
none of which is individually significant to the Group. Leases are negotiated for an average term of three to five years
and rentals are renegotiated annually.
11. Contingencies
2017 2016
Rm Rm
Guarantees 38 789 38 441
Irrevocable debt facilities 162 907 135 935
Irrevocable equity facilities 33 141
Letters of credit 7 814 8 481
Other 262 135
209 805 183 133
Guarantees include performance guarantee contracts and payment guarantee contracts.
Irrevocable facilities are commitments to extend credit where the Group does not have the right to terminate the facilities
by written notice. Commitments generally have fixed expiry dates. Since commitments may expire without being drawn upon, the
total contract amounts do not necessarily represent future cash requirements.
Legal proceedings
The Group has been party to proceedings against it during the reporting period, and as at the reporting date the following
material cases are disclosed:
- Pinnacle Point Holdings Proprietary Limited (PPG): New Port Finance Company and the trustees of the Winifred Trust
(the plaintiffs) allege a local bank conducted itself unlawfully, and that Absa Bank Limited (the Bank) was privy
to such conduct. They have instituted proceedings against the Bank for damages in an amount of R1 387m. Although
Pinnacle Point Holding’s claim has been withdrawn, the second to fifth plaintiff’s claims remain and will proceed
to trial.
- Ayanda Collective Investment Scheme (the Scheme): Absa Capital Investor Services was the trustee of Ayanda Collective
Investment Scheme, in which Corporate Money Managers (CMM) managed a portfolio of assets within the Scheme. The joint
curators of the CMM group of companies and the Altron Pension Fund (an investor in the fund) allege that the defendants
caused damages to them arising from their alleged failure to meet their obligations in the trust deed together with their
statutory obligations set out in the Collective Investment Scheme Act, in respect of which they seek payment of R1 157m.
- On June 19, 2017, the Public Protector released the final report of her office’s investigation into the Bankorp assistance
package provided by the SA Reserve Bank between 1985 and 1995, recommending certain remedial action. Absa acquired
Bankorp in April 1992, for fair value, and had the responsibility of carrying out its existing legal obligations to the
SARB, which were met in full by October 1995. In consequence, Absa , together with the SARB, Minister of Finance and
National Treasury, brought an application to review and set aside the remedial action recommended in the Public
Protector’s report which was successful and the report was thus set aside.
The Group is engaged in various other legal, competition and regulatory matters both in South Africa and a number of other
jurisdictions. It is involved in legal proceedings which arise in the ordinary course of business from time to time,
including (but not limited to) disputes in relation to contracts, securities, debt collection, consumer credit, fraud,
trusts, client assets, competition, data protection, money laundering, employment, environmental and other statutory and
common law issues.
The Group is also subject to enquiries and examinations, requests for information, audits, investigations and legal and other
proceedings by regulators, governmental and other public bodies in connection with (but not limited to) consumer protection
measures, compliance with legislation and regulation, wholesale trading activity and other areas of banking and business
activities in which the Group is or has been engaged.
At the present time, the Group does not expect the ultimate resolution of any of these other matters to have a material adverse
effect on its financial position. However, in light of the uncertainties involved in such matters and the matters specifically
described in this note, there can be no assurance that the outcome of a particular matter or matters will not be material to
the Group’s results of operations or cash flow for a particular period, depending on, amongst other things, the amount of the
loss resulting from the matter(s) and the amount of income otherwise reported for the reporting period.
The Group has not disclosed the contingent liabilities associated with these matters either because they cannot reasonably be
estimated or because such disclosure could be prejudicial to the outcome of the matter. Provision is made for all liabilities
which are expected to materialise.
Regulatory matters
The scale of regulatory change remains challenging and the global financial crisis has resulted in a significant tightening of
regulation and changes to regulatory structures globally and locally, especially for companies that are deemed to be of systemic
importance. Concurrently, there is continuing political and regulatory scrutiny of the operation of the banking and consumer
credit industries globally which, in some cases, is leading to increased regulation. The nature and impact of future changes in
the legal framework, policies and regulatory action especially in the areas of financial crime, banking and insurance regulation,
cannot currently be fully predicted and are beyond the Group’s control. Some of these are likely to have an impact on the Group’s
businesses, systems and earnings.
The Group is continuously evaluating its programmes and controls in general relating to compliance with regulation. The Group
undertakes monitoring, review and assurance activities, and the Group has also adopted appropriate remedial and/or mitigating
steps, where necessary or advisable, and has made disclosures on material findings as and when appropriate.
Absa Bank Limited, a subsidiary of Barclays Africa Group Limited, identified potentially fraudulent activity by certain of its
customers using advance payments for imports in 2014 and 2015 to effect foreign exchange transfers from South Africa to beneficiary
accounts located in East Asia, UK, Europe and the US. As a result, the Group conducted a review of relevant activity, processes,
systems and controls. The Group is continuing to provide information to relevant authorities as part of the Group’s ongoing
cooperation. It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group
or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period,
if any.
In February 2017 the South African Competition Commission (SACC) referred Barclays PLC, BCI and Absa Bank Limited, a subsidiary of
Barclays Africa Group Limited, among other banks, to the Competition Tribunal to be prosecuted for breaches of South African
antitrust law related to Foreign Exchange trading of South African Rand. The SACC found from its investigation that between 2007
and 2013 the banks had engaged in various forms of collusive behaviour. Barclays was the first to bring the conduct to the attention
of the SACC under its leniency programme and has cooperated with, and will continue to cooperate with, the SACC in relation to this
matter. The SACC is therefore not seeking an order from the Tribunal to impose any fine on Barclays PLC, BCI or Absa Bank Limited.
Income Taxes
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group’s tax charge and provisions for
income taxes necessarily involves a degree of estimation and judgement. There are many transactions and calculations for which the
ultimate tax treatment is uncertain or in respect of which the relevant tax authorities may have indicated disagreement with the
Group’s treatment and accordingly the final tax charge cannot be determined until resolution has been reached with the relevant tax
authority.
The Group recognises provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due after
taking into account external advice where appropriate. The carrying amount of any resulting provisions will be sensitive to the
manner in which tax matters are expected to be resolved, and the stage of negotiations or discussion with the relevant tax
authorities. There may be significant uncertainty around the final outcome of tax proceedings, which in many instances, will only
be concluded after a number of years. Management estimates are informed by a number of factors including, inter alia, the progress
made in discussions or negotiations with the tax authorities, the advice of expert legal counsel, precedent set by the outcome of
any previous claims, as well as the nature of the relevant tax environment.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the current and deferred income tax assets and liabilities in the reporting period in which such determination is made. These
risks are managed in accordance with the Group’s Tax Risk Framework.
12. Segment reporting
2017 2016(1)
Rm Rm
12.1 Headline earnings contribution by segment
South Africa Banking 12 200 11 678
RBB South Africa 8 874 8 822
CIB South Africa 3 326 2 856
Rest of Africa Banking 2 954 2 756
WIMI 1 156 1 258
Head Office, Treasury and other operations South Africa (752) (712)
Barclays separation (1 245) -
14 313 14 980
12.2 Total income by segment
South Africa Banking 53 345 52 209
RBB South Africa 42 724 41 932
CIB South Africa 10 621 10 277
Rest of Africa Banking 15 617 16 044
WIMI 5 490 5 221
Head Office, Treasury and other operations South Africa (1 552) (1 080)
Barclays separation 405 -
73 305 72 394
12.3 Total internal income by segment
South Africa Banking (17 150) (14 347)
RBB South Africa (9 157) (9 571)
CIB South Africa (7 993) (4 776)
Rest of Africa Banking (241) (20)
WIMI (471) (382)
Head Office, Treasury and other operations South Africa 17 537 14 749
Barclays separation 325 -
12.4 Total assets by segment
South Africa Banking 1 228 162 1 167 067
RBB South Africa 754 227 730 533
CIB South Africa 473 935 436 534
Rest of Africa Banking 162 720 161 481
WIMI 50 682 51 007
Head Office, Treasury and other operations South Africa (276 497) (278 532)
Barclays separation 912 -
1 165 979 1 101 023
2017 2016(1)
Rm Rm
12.5 Total liabilities by segment
South Africa Banking 1 209 021 1 149 510
RBB South Africa 741 802 718 740
CIB South Africa 467 219 430 770
Rest of Africa Banking 142 394 140 704
WIMI 45 837 45 692
Head Office, Treasury and other operations South Africa (340 493) (337 163)
Barclays separation(2) (9 840) -
1 046 919 998 743
Notes
(1) Operational changes, management changes and associated changes to the way in which the chief operating
decision maker views the performance of each business segment, have resulted in the reallocation of
earnings, assets and liabilities between operating segments. Refer to Note 15.
(2) This presents the cash contribution received from Barclays PLC, net of amounts already spent on
separation activities. The cash received is held centrally by Treasury and is presented as an
intersegmental asset in “Other liabilities”.
13. Assets and liabilities not held at fair value
The following table summarises the carrying amounts and fair value of those assets and liabilities not
held at fair value.
2017 2016(1)
Carrying Fair value Carrying Fair value
value value
Rm Rm Rm Rm
Financial assets
Balances with other central banks 10 281 10 281 13 395 13 395
Balances with the South African Reserve Bank 19 109 19 109 18 552 18 552
Coins and bank notes 13 519 13 519 13 141 13 141
Money market assets - - 38 38
Cash, cash balances and balances with central banks 42 909 42 909 45 126 45 126
Loans and advances to banks 38 228 39 037 29 932 29 827
Other assets 17 486 17 556 22 120 22 188
South Africa Banking 640 009 640 241 612 638 612 531
RBB South Africa 447 752 447 984 434 590 434 483
Retail Banking South Africa 383 495 383 727 375 082 374 973
Credit cards 35 223 35 224 35 614 35 614
Instalment credit agreements 77 044 77 275 73 955 73 650
Loans to associates and joint ventures 23 037 23 037 18 933 18 933
Mortgages 222 625 222 625 223 662 223 674
Other loans and advances 740 740 510 510
Overdrafts 5 443 5 443 3 947 3 947
Personal and term loans 19 383 19 383 18 461 18 645
Business Banking South Africa 64 257 64 257 59 508 59 510
Mortgages (including CPF) 27 833 27 833 25 406 25 408
Overdrafts 19 199 19 199 18 448 18 448
Term loans 17 225 17 225 15 654 15 654
CIB South Africa 192 257 192 257 178 048 178 048
Rest of Africa Banking 77 005 77 137 77 320 77 320
WIMI 5 004 5 004 5 660 5 660
Head Office, Treasury and other
operations in South Africa 943 943 615 615
Loans and advances to customers -
net of impairment losses 722 961 723 325 696 233 696 126
Non-current assets held for sale 1 118 1 118
Total assets 822 702 823 945 793 411 822 702
Financial liabilities
Deposits from banks 54 835 54 915 44 107 44 107
Other liabilities 27 833 27 832 23 600 23 584
Call deposits 81 076 81 076 62 426 62 426
Cheque account deposits 191 048 191 048 200 367 200 367
Credit card deposits 1 921 1 921 1 906 1 906
Fixed deposits 148 328 148 328 153 295 153 358
Foreign currency deposits 28 418 28 418 24 825 24 825
Notice deposits 58 459 58 459 59 358 59 371
Other deposits 2 629 2 629 3 189 3 189
Saving and transmission deposits 157 098 157 098 152 378 152 378
Deposits due to customers 668 977 668 977 657 744 657 820
Debt securities in issue 132 891 132 891 134 197 134 197
Borrowed funds 15 895 15 895 15 673 15 893
Total liabilities 900 431 900 510 875 321 875 601
Note
(1) These numbers have been restated, refer to Note 15.
14. Assets and liabilities held at fair value
14.1 Fair value measurement and valuation processes
Financial assets and financial liabilities
The Group has an established control framework with respect to the measurement of fair values. The framework
includes a Traded Risk and Valuations Committee and an Independent Valuation Control team (IVC), which is
independent from the front office.
The Traded Risk and Valuations Committee, which comprises representatives from senior management, will formally
approve valuation policies and any changes to valuation methodologies. Significant valuation issues are
reported to the Barclays Africa Group Audit and Compliance Committee.
The Traded Risk and Valuations Committee is responsible for overseeing the valuation control process and will
therefore consider the appropriateness of valuation techniques and inputs for fair value measurement.
The IVC team independently verifies the results of trading and investment operations and all significant fair
value measurements. They source independent data from external independent parties, as well as internal risk
areas when performing independent price verification for all financial instruments held at fair value. They
also assess and document the inputs obtained from external independent sources to measure the fair value which
supports conclusions that valuations are performed in accordance with IFRS and internal valuation policies.
Investment properties
The fair value of investment properties is determined based on the most appropriate methodology applicable to
the specific property. Methodologies include the market comparable approach that reflects recent transaction
prices for similar properties, discounted cash flows and income capitalisation methodologies. In estimating
the fair value of the properties, the highest and best use of the properties is taken into account.
Where possible the fair value of the Group’s investment properties is determined through valuations performed
by external independent valuators.
When the Group’s internal valuations are different to that of the external independent valuers, detailed
procedures are performed to substantiate the differences, whereby the IVC team verifies the procedures performed
by the front office and considers the appropriateness of any differences to external independent valuations.
14.2 Fair value measurements
Valuation inputs
IFRS 13 requires an entity to classify fair values measured and/or disclosed according to a hierarchy that reflects
the significance of observable market inputs. The three levels of the fair value hierarchy are defined as follows:
Quoted market prices – Level 1
Fair values are classified as Level 1 if they have been determined using observable prices in an active market.
Such fair values are determined with reference to unadjusted quoted prices for identical assets or liabilities in
active markets where the quoted price is readily available, and the price represents actual and regularly occurring
market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient
volume and frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs – Level 2
Fair values are classified as Level 2 if they have been determined using models for which inputs are observable in
an active market.
A valuation input is considered observable if it can be directly observed from transactions in an active market,
or if there is compelling external evidence demonstrating an executable exit price.
Valuation technique using significant unobservable inputs – Level 3
Fair values are classified as Level 3 if their determination incorporates significant inputs that are not based
on observable market data (unobservable inputs). An input is deemed significant if it is shown to contribute more
than 10% to the fair value of an item. Unobservable input levels are generally determined based on observable
inputs of a similar nature, historical observations or other analytical techniques.
Judgemental inputs on valuation of principal instruments
The following summary sets out the principal instruments whose valuation may involve judgemental inputs:
Debt securities and treasury and other eligible bills
These instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or
pricing service, where available. Where unavailable, fair value is determined by reference to quoted market
prices for similar instruments or, in the case of certain mortgage-backed securities, valuation techniques using
inputs derived from observable market data, and, where relevant, assumptions in respect of unobservable inputs.
Equity instruments
Equity instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or
pricing service, where available. Where unavailable, fair value is determined by reference to quoted market prices
for similar instruments or by using valuation techniques using inputs derived from observable market data, and,
where relevant, assumptions in respect of unobservable inputs.
Also included in equity instruments are non-public investments, which include investments in venture capital
organisations. The fair value of these investments is determined using appropriate valuation methodologies which,
dependent on the nature of the investment, may include discounted cash flow analysis, enterprise value comparisons
with similar companies and price:earnings comparisons. For each investment, the relevant methodology is applied
consistently over time.
Derivatives
Derivative contracts can be exchange-traded or traded over-the-counter (OTC). OTC derivative contracts include
forward, swap and option contracts related to interest rates, bonds, foreign currencies, credit spreads, equity
prices and commodity prices or indices on these instruments. Fair values of derivatives are obtained from quoted
market prices, dealer price quotations, discounted cash flow and option pricing models.
Loans and advances
The disclosed fair value of loans and advances to banks and customers is determined by discounting contractual
cash flows. Discount factors are determined using the relevant forward base rates (as at valuation date) plus
the originally priced spread. Where a significant change in credit risk has occurred, an updated spread is used
to reflect valuation date pricing. Behavioural cash flow profiles, instead of contractual cash flow profiles,
are used to determine expected cash flows where contractual cash flow profiles would provide an inaccurate fair
value.
Deposits, debt securities in issue and borrowed funds
Deposits, debt securities in issue and borrowed funds are valued using discounted cash flow models, applying
rates currently offered for issuances with similar characteristics. Where these instruments include embedded
derivatives, the embedded derivative component is valued using the methodology for derivatives as detailed
above.
The fair value of amortised cost deposits repayable on demand is considered to be equal to their carrying
value. For other financial liabilities at amortised cost the disclosed fair value approximates the carrying
value because the instruments are short term in nature or have interest rates that reprice frequently.
14.3 Fair value adjustments
The main valuation adjustments required to arrive at a fair value are described below:
Bid-offer valuation adjustments
For assets and liabilities where the Group is not a market maker, mid prices are adjusted to bid and offer
prices respectively. Bid-offer adjustments reflect expected close out strategy and, for derivatives, the fact
that they are managed on a portfolio basis. The methodology for determining the bid-offer adjustment for a
derivative portfolio will generally involve netting between long and short positions and the bucketing of risk
by strike and term in accordance with hedging strategy. Bid-offer levels are derived from market sources, such
as broker data. For those assets and liabilities where the firm is a market maker and has the ability to
transact at, or better than, mid-price (which is the case for certain equity, bond and vanilla derivative
markets), the mid-price is used, since the bid-offer spread does not represent a transaction cost.
Uncollateralised derivative adjustments
A fair value adjustment is incorporated into uncollateralised derivative valuations to reflect the impact on
fair value of counterparty credit risk, the Group’s own credit quality, as well as the cost of funding across
all asset classes.
Model valuation adjustments
Valuation models are reviewed under the Group’s model governance framework. This process identifies the
assumptions used and any model limitations (for example, if the model does not incorporate volatility skew).
Where necessary, fair value adjustments will be applied to take these factors into account. Model valuation
adjustments are dependent on the size of portfolio, complexity of the model, whether the model is market
standard and to what extent it incorporates all known risk factors. All models and model valuation adjustments
are subject to review on at least an annual basis.
14.4 Fair value hierarchy
The following table shows the Group’s assets and liabilities that are recognised and subsequently measured at
fair value and are analysed by valuation techniques. The classification of assets and liabilities is based on
the lowest level input that is significant to the fair value measurement in its entirety.
2017
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial Assets
Cash, cash balances and balances with central banks 1 839 3 921 - 5 760
Investment securities 53 068 50 740 7 601 111 409
Loans and advances to banks - 16 714 484 17 198
Trading and hedging portfolio assets 54 966 76 015 1 824 132 805
Debt instruments 29 668 5 133 177 34 978
Derivative assets - 58 980 546 59 526
Commodity derivatives - 981 124 1 105
Credit derivatives - - 165 165
Equity derivatives - 2 371 173 2 544
Foreign exchange derivatives - 15 878 8 15 886
Interest rate derivatives - 39 750 76 39 826
Equity instruments 23 662 - - 23 662
Money market assets 1 636 11 902 1 101 14 639
Other assets - 2 2 4
Loans and advances to customers - 22 070 4 741 26 811
Investments linked to investment contracts 17 906 1 030 - 18 936
Total financial assets 127 779 170 492 14 652 312 923
Financial liabilities
Deposits from banks - 12 555 - 12 555
Trading and hedging portfolio liabilities 11 946 52 279 945 65 170
Derivative liabilities - 52 279 945 53 224
Commodity derivatives - 1 172 121 1 293
Credit derivatives - 10 148 158
Equity derivatives - 1 973 423 2 396
Foreign exchange derivatives - 14 874 4 14 878
Interest rate derivatives - 34 250 249 34 499
Short positions 11 946 - - 11 946
Other liabilities - 3 5 8
Deposits due to customers 203 19 115 1 572 20 890
Debt securities in issue 214 4 355 488 5 057
Liabilities under investment contracts - 30 585 - 30 585
Total financial liabilities 12 363 118 892 3 010 134 265
Non-financial assets
Commodities 2 051 - - 2 051
Investment properties - - 231 231
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 190 190
Non-current liabilities held for sale(1) - - 48 48
2016
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial Assets
Cash, cash balances and balances with central banks 2 388 2 492 - 4 880
Investment securities 60 051 50 906 3 358 114 315
Loans and advances to banks - 19 286 571 19 857
Trading and hedging portfolio assets 33 572 61 419 1 505 96 496
Debt instruments 15 689 6 740 1 324 23 753
Derivative assets - 46 717 181 46 898
Commodity derivatives - 797 - 797
Credit derivatives - 70 114 184
Equity derivatives - 1 540 67 1 607
Foreign exchange derivatives - 15 221 - 15 221
Interest rate derivatives - 29 089 - 29 089
Equity instruments 17 883 - - 17 883
Money market assets - 7 962 - 7 962
Other assets - 4 5 9
Loans and advances to customers - 19 186 4 890 24 076
Investments linked to investment contracts 16 335 2 481 - 18 816
Total financial assets 112 346 155 774 10 329 278 449
Financial liabilities
Deposits from banks - 9 085 - 9 085
Trading and hedging portfolio liabilities 6 508 42 677 308 49 493
Derivative liabilities - 42 677 308 42 985
Commodity derivatives - 875 - 875
Credit derivatives - 137 101 238
Equity derivatives - 1 306 60 1 366
Foreign exchange derivatives - 14 173 - 14 173
Interest rate derivatives - 26 186 147 26 333
Short positions 6 508 - - 6 508
Other liabilities - 4 41 45
Deposits due to customers 154 15 828 1 139 17 121
Debt securities in issue 261 4 652 604 5 517
Liabilities under investment contracts - 29 055 - 29 055
Total financial liabilities 6 923 101 301 2 092 110 316
Non-financial assets
Commodities 1 485 - - 1 485
Investment properties - - 478 478
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 823 823
Non-current liabilities held for sale(1) - - 9 9
Note
(1) Includes certain items classified in terms of the requirements of IFRS 5 which are measured in terms of
their respective standards.
14.5 Measurement of assets and liabilities categorised at Level 2
The following table presents information about the valuation techniques and significant observable inputs
used in measuring assets and liabilities categorised as Level 2 in the fair value hierarchy:
Category of asset/liability Valuation techniques applied Significant observable inputs
Interest rate and/or
Loans and advances to banks Discounted cash flow models money market curves
Trading and hedging portfolio assets and liabilities
Underlying price of market
traded instruments and
Debt instruments Discounted cash flow models interest rates
Derivatives
Discounted cash flow
model, option pricing, Spot price of
futures pricing physical or futures,
and/or Exchange Traded interest rates
Commodity derivatives Fund (ETF) models and/or volatility
Interest rate,
recovery rate,
Discounted cash flow credit spread
and/or option pricing and/or
Credit derivatives models quanto ratio
Discounted
cash flow model, Spot price,
option pricing interest rate,
and/or futures volatility and/or
Equity derivatives pricing models dividend stream
Discounted cash Spot price,
Foreign exchange flow and/or option interest rate
derivatives pricing models and/or volatility
Interest rate
curves, repurchase
Discounted cash agreement curves,
flow and/or option money market curves
Interest rate derivatives pricing models and/or volatility
Money market
Discounted cash rates and/or
Money market assets flow models interest rates
Interest rate
Loans and advances Discounted cash and/or money
to customers flow models market curves
Listed equity: Underlying price
market bid price. of the market
Investment securities Other items: traded instrument
and investments linked discounted cash and/or interest
to investment contracts flow models rate curves
Interest rate curves
Deposits Discounted cash and/or money
from banks flow models market curves
Interest
rate curves
Deposits due Discounted cash and/or money
to customers flow models market curves
Underlying price
of the market
traded instrument
Debt securities in Discounted cash and/or interest
issue and other liabilities flow models rate curves
14.6 Reconciliation of Level 3 assets and liabilities
A reconciliation of the opening balances to closing balances for all movements on Level 3 assets and liabilities is
set out below:
2017
Trading and
hedging Loans and
portfolio Other advances to
assets assets customers
Rm Rm Rm
Opening balance at the beginning of the reporting period 1 505 5 4 890
Net interest income - - 12
Other income - - -
Gains and losses from banking and trading activities (635) - 29
Gains and losses from investment activities - - -
Purchases 1 101 - 1 020
Sales (147) - (1 112)
Movement in other comprehensive income - - -
Settlements - ( 3) -
Transfer in/(out) of Level 3 - - (98)
Closing balance at the end of the reporting period 1 824 2 4 741
Loans and advances to banks Investment securities
Rm Rm
Opening balance at the beginning of the reporting period 571 3 358
Net interest income - 62
Other income - -
Gains and losses from banking and trading activities - -
Gains and losses from investment activities - 2
Purchases 88 4 832
Sales (175) (579)
Movement in other comprehensive income - 29
Settlements - (22)
Transfer in/(out) of Level 3 - (81)
Closing balance at the end of the reporting period 484 7 601
Investment properties Total assets at fair value
Rm Rm
Opening balance at the beginning of the reporting period 478 10 807
Net interest income - 74
Other income 12 12
Gains and losses from banking and trading activities - (606)
Gains and losses from investment activities - 2
Purchases 1 7 042
Sales (260) (2 273)
Movement in other comprehensive income - 29
Settlements - (25)
Transfer in/(out) of Level 3 - (179)
Closing balance at the end of the reporting period 231 14 883
2016
Trading and
hedging Loans and
portfolio Other advances to
assets assets customers(1)
Rm Rm Rm
Opening balance at the beginning of the reporting period 1 418 25 7 511
Net interest income - - 232
Other income - - -
Gains and losses from banking and trading activities 112 - 65
Gains and losses from investment activities - - -
Purchases 1 308 (3) -
Sales (1 333) (17) (1 956)
Movement in other comprehensive income - - -
Transferred to/(from) assets/liabilities - - -
Transfer out of Level 3 - - (962)
Closing balance at the end of the reporting period 1 505 5 4 890
Loans and advances to banks Investment securities
Rm Rm
Opening balance at the beginning of the reporting period 2 109 3 966
Net interest income - 56
Other income - -
Gains and losses from banking and trading activities (140) (1 079)
Gains and losses from investment activities - 106
Purchases 70 543
Sales (1 468) (233)
Movement in other comprehensive income - (80)
Transferred to/(from) assets/liabilities - 1 136
Transfer out of Level 3 - (1 057)
Closing balance at the end of the reporting period 571 3 358
Investment properties Total assets at fair value
Rm Rm
Opening balance at the beginning of the reporting period 1 264 16 293
Net interest income - 288
Other income 17 17
Gains and losses from banking and trading activities - (1 042)
Gains and losses from investment activities - 106
Purchases 28 1 946
Sales (83) (5 090)
Movement in other comprehensive income - (80)
Transferred to/(from) assets/liabilities (748) 388
Transfer out of Level 3 - (2 019)
Closing balance at the end of the reporting period 478 10 807
Note
(1) The gains and losses from banking and trading activities on loans and advances to customers for 2016 have been
restated by R65m to include the movement in the unrealised gains relating to the base rates to the assets. Previously
only unrealised gains relating to the unobservable credit spreads for these assets were taken into account in the
disclosure.
2017
Trading and
Deposits hedging
from portfolio Other
banks liabilities liabilities
Rm Rm Rm
Opening balance at the beginning of the reporting period - 308 41
Net interest income - - -
Gains and losses from banking and trading activities - 585 -
Movement in other comprehensive income - - -
Issues - 52 -
Settlements - - (36)
Transferred to/(from) assets/liabilities - - -
Transfer in/(out) of Level 3 - - -
Closing balance at the end of the reporting period - 945 5
Deposits due Debt securities Total liabilities
to customers in issue at fair value
Rm Rm Rm
Opening balance at the beginning of the reporting period 1 139 604 2 092
Net interest income 7 - 7
Gains and losses from banking and trading activities - - 585
Movement in other comprehensive income - - -
Issues 1 685 30 1 767
Settlements (1 144) (68) (1 248)
Transferred to/(from) assets/liabilities - - -
Transfer in/(out) of Level 3 (115) (78) (193)
Closing balance at the end of the reporting period 1 572 488 3 010
2016
Trading and
Deposits hedging
from portfolio Other
banks liabilities liabilities
Rm Rm Rm
Opening balance at the beginning of the reporting period 7 217 5
Net interest income - - -
Gains and losses from banking and trading activities - 91 -
Gains and losses from investment activities - - -
Issues - - 36
Settlements (7) - -
Transfer in/(out) of Level 3 - - -
Closing balance at the end of the reporting period - 308 41
Deposits due Debt securities Total liabilities
to customers in issue at fair value
Rm Rm Rm
Opening balance at the beginning of the reporting period 2 557 624 3 410
Net interest income - - -
Gains and losses from banking and trading activities - - 91
Gains and losses from investment activities 139 (9) 130
Issues 1 953 - 1 989
Settlements (3 510) (11) (3 528)
Transfer in/(out) of Level 3 - - -
Closing balance at the end of the reporting period 1 139 604 2 092
14.6.1 Significant transfers between levels
During the 2017 and 2016 reporting periods, transfers between levels occurred because of changes in the
observability of valuation inputs, in some instances owing to changes in the level of market activity.
Transfers have been reflected as if they had taken place at the beginning of the year.
14.7 Unrealised gains and losses on Level 3 assets and liabilities
The total unrealised gains and losses for the reporting period on Level 3 positions held at the reporting
date are set out below:
2017
Trading and hedging Loans and advances Investment
portfolio assets to customers securities
Rm Rm Rm
Gains and losses from
banking and trading activities 67 761 60
Total assets Trading and hedging Total liabilities
at fair value portfolio liabilities at fair value
Rm Rm Rm
Gains and losses from banking
and trading activities 888 284 284
2016
Trading and hedging Loans and advances Investment
portfolio assets to customers(1) securities
Rm Rm Rm
Gains and losses from banking and
trading activities 3 731 29
Total assets Trading and hedging Total liabilities
at fair value portfolio liabilities at fair value
Rm Rm Rm
Gains and losses from banking and
trading activities 763 86 86
Note
(1) The unrealised gains and losses for loans and advances to customers for 2016 have been restated by R692m to
include the unrealised gains relating to the base rates applicable to the assets. Previously only normalised
gains relating to the unobservable credit spreads for these assets were taken into account in the disclosure.
14.8 Sensitivity analysis of valuations using unobservable inputs
As part of the Group’s risk management processes, stress tests are applied on the significant unobservable
parameters to generate a range of possible alternative valuations. The assets and liabilities that most
impact this sensitivity analysis are those with the more illiquid and/or structured portfolios. The stresses
are applied independently and do not take account of any cross correlation between separate asset classes
that would reduce the overall effect on the valuations.
The following table reflects how the unobservable parameters were changed in order to evaluate the
sensitivities of Level 3 financial assets and liabilities:
Significant unobservable parameter Positive/(negative) variance applied to parameters
Credit spreads 100/(100) bps
Volatilities 10/(10)%
Basis curves 100/(100) bps
Yield curves and repo curves 100/(100) bps
Future earnings and marketability discounts 15/(15)%
Funding spreads 100/(100) bps
A significant parameter has been deemed to be one which may result in a charge to profit or loss, or a change
in the fair value asset or liability by more than 10% or the underlying value of the affected item. This is
demonstrated by the following sensitivity analysis which includes reasonable range of possible outcomes:
2017
Potential effect Potential effect
recorded in recorded directly
profit or loss in equity
Significant
unobservable Favourable/ Favourable/
parameters (Unfavourable) (Unfavourable)
Rm Rm
Deposits due BAGL/Absa
to banks funding spread 17/(17) -/-
Deposits due BAGL/Absa
to customers funding spread 13/(12) -/-
Investment securities Risk adjustment yield curves,
and investments linked future earnings and
to investment contracts marketability discount 76/(76) 323/(306)
Loans and advances
to customers Credit spreads 70/(69) -/-
Other assets Credit spreads -/- -/-
Volatility,
credit spreads,
basis curves,
yield curves,
Trading and hedging repo curves,
portfolio assets funding spreads 33/(33) -/-
Volatility,
credit spreads,
basis curves,
yield curves,
Trading and hedging repo curves,
portfolio liabilities funding spreads 17/(17) -/-
Volatility,
Other liabilities credit spreads -/- -/-
226/(224) 323/(306)
2016
Potential effect Potential effect
recorded in recorded directly
profit or loss in equity
Significant
unobservable Favourable/ Favourable/
parameters (Unfavourable) (Unfavourable)
Rm Rm
Deposits due BAGL/Absa
to customers funding spread -/- -/-
Investment Risk adjustment
securities yield curves,
and investments future earnings
linked to and marketability
investment contracts discount 34/(36) 94/(100)
Loans and advances
to customers Credit spreads 72/(71) -/-
Other assets Credit spreads -/- -/-
Volatility,
credit spreads,
basis curves,
yield curves,
Trading and hedging repo curves,
portfolio assets funding spreads 175/(175) -/-
Volatility,
credit spreads,
basis curves,
yield curves,
Trading and hedging repo curves,
portfolio liabilities funding spreads 20/(20) -/-
Volatility,
Other liabilities credit spreads -/- -/-
301/(302) 94/(100)
14.9 Measurement of assets and liabilities at Level 3
The following table presents information about the valuation techniques and significant unobservable inputs
used in measuring assets and liabilities categorised as Level 3 in the fair value hierarchy:
2017 2016
Valuation Significant
Category of techniques unobservable Range of estimates
asset/liability applied inputs utilised for the
unobservable inputs
Loans and advances Discounted cash flow
to banks and customers and/or dividend yield models Credit spreads 0,3% to 2,3% 0,5% to 5%
Discounted cash flow
models, third-party Risk adjusted yield
valuations, earnings curves, future Discount rate Discount rate
Investment securities multiples and/or earnings, marketability of 7% and 9%, of 13%, comparator
and investments linked income capitalisation discounts and/or comparator multiples multiples between
to investment contracts valuations comparator multiples between 5 and 10,5 5 and 10,5
Trading and hedging
portfolio
assets and liabilities
Debt instruments Discounted cash flow models Credit spreads 3% to 15% 1,2% to 11,2%
Derivative assets
Discounted cash flow Credit spreads,
and/or credit recovery rates
default swap and/or quanto
Credit derivatives (hazard rate) models ratio 0% to 90% 0% to 40%
Discounted cash flow, Volatility and/or
option pricing and/or dividend streams
Equity derivatives futures pricing models (greater than 3 years) 15,09% to 64,67% 17,82% to 67,71%
Foreign exchange Discounted cash flow African basis curves
derivatives and/or option pricing models (greater than 1 year) (28%) to 29,5% (16,6%) to 13,1%
Real yield curves
(greater than 1 year),
repurchase agreement
Discounted cash flow curves (less than
and/or option pricing 1 year), funding
Interest rate derivative models spreads 0,25% to 10,69% 0,31% to 3,38%
BAGL’s funding
Deposits due Discounted cash spreads (greater
to customers flow models than 5 years) 0,2% to 1,9% (0,27%) to 2,13%
Funding curves
Debt securities Discounted cash (greater than
in issue flow models 5 years) 0,2% to 1,9% (0,27%) to 2,13%
Estimates of periods
in which rental units
will be disposed of 1 to 6 years 1 to 10 years
Annual selling price escalations 0% to 6% 1% to 7%
Annual rental escalations 0% to 6% 1% to 7%
Expense ratios n/a 25% to 50%
Vacancy rates n/a 1% to 7%
Income capitalisation rates 7,75% to 8% 10% to 11%
Investment properties Discounted cash flow models Risk adjusted discount rates 11% to 15% 14%
For assets or liabilities held at amortised cost and disclosed in levels 2 or 3 of the fair value hierarchy,
the discounted cash flow valuation technique is used. Interest rates and money market curves are considered
unobservable inputs for items which mature after 5 years. However, if the items mature in less than 5 years,
these inputs are considered observable.
For debt securities in issue held at amortised cost, a further significant input would be the underlying
price of the market traded instrument.
The sensitivity of the fair value measure is dependent on the unobservable inputs. Significant changes to the
unobservable inputs in isolation will have either a positive or negative impact on fair values.
14.10 Unrecognised losses as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the difference
between the transaction price and the amount that would have arisen had valuation models using unobservable
inputs been used on initial recognition, less amounts subsequently recognised, is as follows:
2017 2016
Rm Rm
Opening balance at the beginning of the reporting period (139) (105)
New transactions (27) (64)
Amounts recognised in profit or loss during the reporting period 32 30
Closing balance at the end of the reporting period (134) (139)
14.11 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable third-party
credit enhancements.
15. Reporting changes overview
15.1 Accounting policy changes
The Group made the following accounting policy changes as a result of new and amended standards of IFRS,
which had no impact on the previously reported earnings of the Group:
The Group adopted the requirement to present the effects of changes in the fair value, which relate to
own credit, of financial liabilities designated at fair value through profit or loss in other comprehensive
income at 1 January 2017. The impact of this change has been detailed in the statement of comprehensive
income and has no impact on opening reserves/retained earnings. Comparatives have not been restated.
All other amendments to IFRS, and new interpretations, effective for the current reporting period had
no significant impact on the Group’s reported results.
15.2 Changes in reportable segments
The following business portfolio changes have impacted the financial results for the comparative period.
None of the restatements have impacted the overall financial position or net earnings of the Group:
- Barclays PLC disposed of 12,2% and 33,7% of the Group’s shares in May 2016 and June 2017,
respectively. As part of its divestment Barclays PLC contributed £765m, primarily in recognition of the
investments required for the Group to separate from Barclays PLC. This contribution will be invested
primarily in rebranding, technology and separation-related projects and it is expected that it will
neutralise the capital and cash flow impact of separation investments on the Group over time. The
separation process will increase the capital base of the Group in the near-term and generate endowment
revenue thereon, with increased costs over time as the separation investments are concluded. The Group has
therefore included an additional reconciling stripe ‘Barclays separation’, in its segment results.
- In the second half of 2016, the Group revised its operating model with ‘geography’ and ‘customer’ as
primary dimensions, creating a platform for increased focus and dedicated management capacity: South Africa
Banking, Rest of Africa Banking and WIMI (historically reporting was by customer only i.e. RBB, CIB and WIMI).
The reporting changes to financial disclosures were implemented from 1 January 2017.
- The Group refined its cost allocation methodology, resulting in the restatement of operating expenses from
RBB South Africa (R528m), CIB Rest of Africa (R83m) and Head Office, Treasury and other operations (R7m) to
CIB SA R379m, WIMI R194m and RBB Rest of Africa R45m.
- Commercial Property Finance (CPF) customers with loan balances exceeding R40m of R10.9bn were moved from
Retail and Business Banking (RBB SA) to Corporate and Investment Banking (CIB SA) to reflect the Group’s
customer segmentation and coverage model.
- The Group further enhanced segmental disclosures in the second half of 2017 to provide granularity to the
South Africa Banking segment (which now expands to RBB SA and CIB SA levels).
Our contact details
Barclays Africa Group Limited
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
Authorised financial services and registered credit provider (NCRCP7)
JSE share code: BGA
ISIN: ZAE000174124
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Switchboard: +27 11 350 4000
barclaysafrica.com
Head Investor Relations
Alan Hartdegen
Telephone: +27 11 350 2598
Group Company Secretary
Nadine Drutman
Telephone: +27 11 350 5347
Head of Financial Control
John Annandale
Telephone: +27 11 350 3496
Transfer secretary
Computershare Investor Services (Pty) Ltd
Telephone: +27 11 370 5000
computershare.com/za/
Auditors
Ernst & Young Inc.
Telephone: +27 11 772 3000
ey.com/ZA/en/Home
KPMG Inc
Telephone: +27 11 647 7111
kpmg.com/ZA/en/Home
Queries
Please direct investor relations and annual report queries to
groupinvestorrelations@barclaysafrica.com
Please direct media queries to groupmedia@barclaysafrica.com
For all customer and client queries, please go to the relevant country
website (see details below) for the local customer contact information
Please direct queries relating to your Barclays Africa Group shares to
questions@computershare.co.za
Please direct other queries regarding the Group to
groupsec@barclaysafrica.com
ADR depositary
BNY Mellon
Telephone: +1 212 815 2248
bnymellon.com
Sponsors
Lead independent sponsor
J.P. Morgan Equities South Africa (Pty) Ltd
Telephone: +27 11 507 0300
jpmorgan.com/pages/jpmorgan/emea/local/za
Joint sponsor
Absa Bank Limited (Corporate and Investment Bank)
Telephone: +27 11 895 6843
equitysponsor@absacapital.com
Significant banking subsidiaries
Information on the entity and the products and services provided (including banking,
insurance and investments) can be found at:
Absa Bank Limited absa.co.za
Barclays Bank of Botswana Limited barclays.co.bw
Barclays Bank of Ghana Limited gh.barclays.com/
Barclays Bank of Kenya Limited barclays.co.ke
Barclays Bank Mauritius Limited barclays.mu
Barclays Bank Mozambique SA barclays.co.mz/eng
Barclays Bank Seychelles Limited barclays.sc
Barclays Bank Tanzania Limited barclays.co.tz
Barclays Bank of Uganda Limited barclays.co.ug
Barclays Bank Zambia Plc zm.barclays.com/
National Bank of Commerce Limited nbctz.com
Representative offices
Absa Namibia Pty Limited absanamibia.com.na
Absa Capital Representative Office Nigeria Limited cib.absa.co.za
Date of release: 1 March 2018
Date: 01/03/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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